Reserving solution of the year: LCP
Reserving is critically important to insurers' operations. It can have a major impact on overall business performance, so firms can really benefit from identifying underperforming areas quickly and efficiently.
Despite its importance, innovation in reserving has been sadly lacking. InsurSight, an automated trend identification tool launched in April 2020 by consultancy LCP, aims to address this.
LCP says InsurSight was developed in response to feedback from market participants and regulators highlighting the need for a fresh approach to reserving and, in particular, a desire to improve insurers' ability to identify reserving trends.
"Traditional reserving methods have been stable for a large number of years and that's because a lot of the time they work pretty well and the benefits from reserving aren't immediately self-evident," explains Charlie Stone, partner at LCP.
"Businesses are realising there are opportunities to save time in the reserving process - and also reserving processes provide something unique."
LCP says a key aspect of InsurSight is its use of machine learning technology. The consultancy notes a working party at the Institute and Faculty of Actuaries recently found 100% of the firms they surveyed were keen to use machine learning in reserving, but very few had succeeded.
Clients are now reporting to LCP that InsurSight is the first time they have seen machine learning "really helping and becoming embedded in their reserving processes".
Ultimately, Stone says InsurSight aids with the two critical parts of the reserving process.
"Firstly, at the beginning of the exercise where you're deciding which class of business you're needing to focus on. InsurSight really helps with that because it picks out the key trends for you, so it's helping save time.
"Then it helps at the end of the reserving process when reviewing the results by checking the story makes sense, and helping pre-empt questions from the reserving committee and making sure you've clear responses to those questions.
"InsurSight helps with providing that review for you and picking out areas you need to spend a bit more time on," says Stone.
The judges praised the offering for providing good reserving without needing to rely heavily on actuarial predictions and concluding it allowed insurers to "pierce the veil of technical provisions".