'Data is the new oil' - while this phrase accurately captures the increasingly central role of data in our economy, it misses another key facet of its rise, its growing volume. In 2020,the world generated on average 2.5 quintillion (10^18) bytes of data per day, a figure which is expected to increase almost 200-fold by 2025 [i].The insurance industry is no exception in its reliance on data, the bedrock of all operations from quote to bind to claim. The exponential growth in alternative data has catalyzed rapid expansion of the MGA marketplace which is the fastest growing insurance segment in the world, accelerating at a CAGR of 6.7% since 2011 and capturing over $60B in GWP in the US and London markets[ii].With this fulminant expansion in data comes, on the one hand, enhancements at all stages of the insurance life cycle, but on the other hand, creates new logistical problems in data management. Here, we examine the outdated reporting practices which dominate the industry and design the features necessary to modernize these workflows for the new Age of Data.
As a corollary of their delegated authority, managing insurance business on behalf of insurers, MGAs must periodically supply (re)insurers with reports on their portfolio. These reports typically take the form of bordereau reports which represent a summary of risks, premiums or claims from the underlying policies.
Reinsurance treaties typically outline reporting requirements, stipulating either annual or quarterly reporting. However, MGAs often underwrite in specialty areas with fast-changing risk profiles and thus capacity providers may be blinded to risks or opportunities evolving between these timepoints. Furthermore, some risks have their own reporting schedules such as commercial liability insurance where coverage may be denied or terminated if an incident which causes or could lead to a claim is not promptly reported. It is also important to inform carriers about all stages of claim escalation including FNOL, developing litigation and when losses reach 50% and near 100% of the retention limit [iii].With increasingly complex risks and tightening regulation, timely data transmission is essential and quarterly/annual reporting may lack the resolution to adequately inform (re)insurers about their books of business.
Bordereau reports may be sent directly to the carrier/reinsurer or pass via a broker who may inspect for errors before submission. Either the MGA or broker management information teams are often tasked with manually processing and cleaning bordereaux through basic software such as Excel and claims handlers manually input claims data into their management systems. In some instances, insurers may even receive bordereaux in a format incompatible with their binder management system adding further burden for the recipient. These processes are labor-intensive and error-prone, introducing delays in the chain and increasing the probability of risk rejection. At each stage, the MGA, broker and (re)insurer each end up rekeying and reworking data, leading to duplication of effort and expending valuable resources away from their core business.
Not only do these practices introduce delays, errors and incomplete information into the system, they also inhibit placement of business. Indeed, one major reinsurer we spoke with explained that they are forced to limit the number of binders they use due to the associated administrative headache. Furthermore, these antiquated practices are difficult to scale and undercut the value generated by leading MGAs/brokers who want to best showcase their/their client’s underwriting.
In November 2020, Lloyd's published Blueprint Two as the second chapter in its Future at Lloyd's transformation strategy. It outlines a two-year execution plan of actionable steps to effectand build on the goals set out in its prequel one year earlier. At its core is the generation of digital end-to-end journeys predicated on advanced data collection and management, delivering cost savings of >£800M for brokers, insurers and delegated authorities through reduction in rework, rekeying and errors [iv].
Lloyd's will be providing risk data and processing standards to support and accredit subscribing third party placing platforms including the leading platform PPL. The facility and risk data, created upon bind will be siphoned into the Core Data Record alongside derived data acting as a single version of truth for downstream processing including accounting, payment, endorsements, claims, renewals and reporting. The CDR will where possible follow industry data standards [iv].
In a similar vein, in its 2021 priorities update, the Lloyd's Market Association (LMA) designated 'driving common standards...across the London market' as a top priority, stating further that 'All market participants should be able to exchange and manipulate data without first altering it'. The LMA emphasized the need for new technology platforms with standardized data for open-market placement, claims and delegated authority [v].The ultimate aim is to create a digitized market streamlined by electronic processing, saving human capital for more complex problem-solving.
At Noldor, we believe consistent and high-quality standardized data processed through modern systems is central to achieving this vision. At present, stakeholders are forced to report on imperfect, delayed information originating from a hodgepodge of MGA policy administration or in-house legacy systems. Each member of the chain tries to clean and rework the data leading to duplication of effort and introducing errors which further distort the game of Telephone.
At Noldor, we consolidate data at the point of origin, integrating hands-free through multiple channels with MGAs, TPAs and risk modelling frameworks to provide a unified view of the policy life cycle. Our automated back-end data cleaning and validation provides a rapid, accurate and scalable solution for the growing body of data, freeing MGAs and brokers to focus on generating value in their core business. With real-time reporting to capacity providers, we allow MGAs and brokers to improve the timeliness of their submissions, deepening relationships with business partners and keeping (re)insurers abreast of their portfolio.
Multiple effective data standards already exist tailored to different use cases and all insurers build on these through customized endpoints suited to their needs. This is why we map from our core schema to leading guidelines such as those of ACORD, Oasis and Blueprint Two, acting as the Rosetta Stone for program data. Beyond creating a single version of truth for the chain, we offer clients underwriting insights on this centralized dataset to inform new strategies to maximize profit.