Munich Re combines with primary insurers to discover hidden loss drivers

Munich Re says developments in data analytics and artificial intelligence have enabled it to discover hidden loss drivers and respond accordingly, for example by introducing loss-prevention measures or adjusting pricing.

Data analytics and artificial intelligence open up new possibilities for managing and covering risk, says Munich Re. The company’s experts combine primary insurers’ portfolio data with external, public sources, for example about site geography, building construction, weather or socio-economic status. By applying machine-learning principles, Munich Re can discover hidden loss drivers and respond accordingly, for example by introducing loss-prevention measures or adjusting pricing.

Taking the example of motor insurance, “The Box” supports cedants in managing their portfolios, by using machine learning to precisely predict expected damage. If one then adds external data such as weather conditions, accident statistics or socio-economic information to the mix, the loss estimates become even more accurate and loss ratios can be measurably lowered. The tool is completely automatic, allowing primary insurers to price more efficiently and significantly reduce costs.

Doris Höpke, member of Munich Re’s board of management, said: “At Munich Re, our goal is to pioneer digital solutions for the insurance industry. So we have been investing heavily in data analytics and artificial intelligence, in order to support our clients with innovative methods and new products. This means faster claims estimates and handling, and better pricing as a result of improved accuracy in risk assessment. Not to mention better loss prevention in the first place."

Another Munich Re data analytics initiative is called “AQUALYTIX” and applies to water-mains damage. For more than 10 years now, more than half of all losses in traditional residential-building insurance have come from water-mains damage – a problem for which no satisfactory solution has yet been found. Munich Re’s experts again combined the primary insurer’s portfolio data with external sources to analyse the situation.

Get all the latest re/insurance industry news with our daily newsletter -  sign up here.

Consultancy firms urged to insure against Brexit fallout

David Barber Joins Fortegra as chief underwriting officer

Markel International makes senior appointments

Feature:  10 ways insurers are using insurtech to drive new business