Poor-quality pricing models are reducing underwriting profits, report warns

More than half of UK underwriters believe their profits are being eroded by poor-quality pricing models, according to a survey by independent research firm Coleman Parkes.

The survey of 350 specialty and commercial underwriters and actuaries, conducted on behalf of pricing-focused insurtech hyperexponential, found 89 percent of UK respondents and 78 percent in the US said their pricing technology needs improvement.

Nearly all (98 percent) said they would be investing in pricing technology over the next 12 months.

However, integration with legacy systems remains a challenge with 57 percent citing integration issues as a key problem in transformation initiatives.

The survey found an average quote-to-bind time of one to two weeks, with underwriters spending on average three hours each day on data entry.

More than half (56 percent) of actuaries and underwriters said their organisation’s current technology limits their underwriting and actuarial work. A similar number (53 percent) believe it is causing their organisations to fail to meet the demands of a rapidly changing risk landscape.

Both UK and US respondents highlighted data handling as an issue. In the UK, the lack of in-house expertise to make the most of the data was seen as a key obstacle for 31 percent of those surveyed.

US respondents listed hours wasted on rekeying data and lack of real-time visibility into their portfolio as the top two concerns.

Around 35 percent of actuaries said they lacked the technology to handle the sheer volume of data, while 34 percent of underwriters blamed siloed data for a lack of pricing transparency and inability to write emerging risks.

The insurtech’s CEO and co-founder Amrit Santhirasenan described the survey results as frustrating and said the tools and systems used to harness pricing data were “fragmented and unfit for purpose”.

“(Re)insurers are limited by a lack of visibility into risk and outdated pricing models that weaken decision-making. The world is transforming, but (re)insurance has lagged behind for too long,” Santhirasenan said.

“The most forward-thinking and ambitious players are leaning into advanced technologies including AI and machine learning. They realise the value better pricing decisions have on their growth. They are shedding legacy systems and equipping their teams with real-time insights to make intelligent decisions across their portfolio and throughout their operations.

“We have a world of opportunity before us if we are able to adapt. The organisations that don’t will die. It is that simple.”