We hear a lot about insurtech, but where is the ERMtech?
Much of the focus of insurance technology development has been on marketing, distribution and claims management, predominantly in retail insurance. These are the areas where developments in social media analytics, handling of big data, automated processing and machine learning have been able to make a significant difference to established practices – and retail is also the side of the insurance business that your average entrepreneur will understand best.
But for the traditional risk and actuarial tools, there have been few breakthroughs to date. An analysis on the insurtech, scene published earlier this year by digital insurance developer Policen Direkt and consultancy Oliver Wyman, found there was relatively little activity and relatively little chance of success in the "balance sheet and financial resource management" category, which includes financial and investment management, asset-liability management (ALM) and risk assessment.
Dietmar Kottmann, Oliver Wyman partner and co-author of the report, says there is historically less activity in this category than the others, and it is currently dominated by a handful of players which makes it harder for a newcomer to achieve success.
But he stresses the assessment is "for the ideas we know about today. If new ideas are generated – like in a future in which you might trade individual risks in a blockchain or smart contract ecosystem, the category might become highly attractive."
In the underwriting space, the Policen Direkt/Oliver Wyman report found more activity and reckoned on a much higher chance of success.
Insurers will always have demand for systems that help them gauge and take risk. PwC's 2017 Global InsurTech survey found the number one priority was "increased sophistication of data models and analytics to better identify and quantify risk".
Among the biggest growth areas are cyber risk, with firms such as Corax and Cyence offering systems to help price and manage cyber risk. The demand from regulators that London insurers model a 1-in-200-year loss from cyber is pushing a lot of development in this area. It's a similar story for casualty risk accumulation, which has been a focus for firms such as Praedicat, Arium and Tyche Risk.
Below, InsuranceERM showcases eight insurtech firms that are promising to help insurers improve their risk management, underwriting and compliance activities.