Sharing data and insights is something that individual insurers are unable to do unless an impartial industry group, such as Lloyd’s, facilitates a ‘protected space’ for them to do this in. It rarely happens without this encouragement, even though the benefits for the market of pooling modelling data for complex risks could be huge – allowing better pricing, which benefits both clients and insurers.
So, in the case of industry start-up, Hyperexponential, the role of the innovation team in the Lloyd’s Lab was not primarily to help educate the young team about insurance – in fact the HX team already had some experience within the London market – but to bring together different firms and make it possible for them to share information and see the benefits of the results. In this example the aim was to allow pricing teams to share live data while modelling new risks, especially those in the specialty markets.
The idea was focused on the pre-contract pricing work that must be done for each risk before it is underwritten. Traditionally a company actuary built their own company-specific pricing model in Excel to price a new risk. However, the system that was developed through the Lab allows pricing to be done collaboratively in a shared system.
It was a brave move in a market where modelling and pricing intelligence has traditionally been jealously guarded, but the HX team had an idea that chimed closely with Lloyd’s own ambitions for data sharing among managing agents and insurers.
While in the Lab three mentors provided input and data. Beazley and Atrium helped with the building of the proof of concept model, while Navigators provided an IT mentor.
The HX team found that their time in the Lab “had a huge impact on our relationship with the market through the networks that we built up”. They found that the programme gave them much-needed insight into what would be most valued by clients, as well as how important ease of integration would be to pricing. It turned out that, even experienced in-market teams can learn more about the insurance ecosystem when paired with new teams in an innovation space.
HX were also helped by the Lab to bring together the network of specialists who might collaborate within their product during their two-month project. They in fact set up a best-practice market pricing group in partnership with the LMA and Lloyd’s, and this collaboration forum for senior actuaries continues to meet monthly. HX were enthusiastic about the role that the Lab played in making the cross-market partnerships they needed a reality.