Issues & Answers Special Advertising Section
April 2020

Issues & Answers: Data Analytics Reimagined

Stephan Hochburger, client executive and senior vice president for Munich Reinsurance America, said there has been a tremendous evolution in data and analytics over the past five years. “Sophisticated carriers have caught on and are just now cracking the nut in how they can creatively use data and analytics to make better informed decisions when it comes to risk assessment and placement,” he said. The following are excerpts of that interview.

Stephan Hochburger

Stephan Hochburger
Client Executive and Senior Vice President
Munich Reinsurance America

“[Risk analytics] is going to allow us to identify trends faster, and not just on the underwriting side, but also on the claims handling side.”

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When it comes to evaluating risk, how are data and analytics being used today?

They’re used in various ways helping us in risk assessment. They help us in rating and pricing of risks. They supplement and complement both internal data as well as outside data from traditional insurance questionnaires. In extreme cases they’re actually at the point now where data and analytics can, in some cases, take the place of the manual underwriting process. For some lines of business data, analytics, and feeding artificial intelligence can select risk and price risk.

What do you see as the biggest challenges in risk analytics?

It’s the data quality. As the saying goes: It’s garbage in, garbage out. Testing the data that you collect before you actually implement it in any kind of decision-making process is an extremely important step. Otherwise you run the risk of using data to make incorrect selections, and that can have a very bad outcome, and can be a very costly outcome. The second challenge is how to creatively use your own data. All insurance carriers have tremendous amounts of data, but the way the data is organized has to be adjusted to be suitable for data analytics and to give us broader answers.

How do you see risk analytics changing in the future?

It’s going to get better. I think it’s going to become an even more important part of our industry with every day that goes by. It’s going to allow us to identify trends faster and not just on the underwriting side, but also on the claims handling side. Data analytics can help us here.

How do you see analytics being used for better risk assessment?

It’s the combination of available internal data, using it creatively and then looking at it differently. Then supplement it with regularly available outside data. There are areas that are more suitable than others at this point. Personal lines would be one as it is more than half of the property and casualty industry and it’s more than half of the premiums written. That’s a tremendous opportunity for a quick start. Small commercial is obviously also quite attractive, low-hanging fruit for creatively using data and analytics. Munich Re is working with our clients to help them better be prepared to use both proprietary and third-party data to analyze and predict risk. Ultimately, the goal is to help them price, underwrite, and process claims more efficiently and effectively for their customers.