hyperexponential, the pricing platform for global re/insurers has released its "State of Pricing 2024" report, highlighting the ongoing challenges in the insurance sector despite the potential of new technology.
The report indicates that while technology has unlocked numerous opportunities, issues related to the broader ecosystem and outdated systems are hindering innovation, efficiency, profitability, and collaboration within the industry.
According to the report, 96% of underwriters and actuaries believe their pricing technology requires improvement, an increase from 84% in 2023. Although only 8% of insurers continue to rely solely on traditional spreadsheets or Excel for pricing, the adoption of modern pricing platforms has not fully addressed the challenges of modernisation, integration, and implementation.
The survey found that 47% of respondents struggle to price optimally due to difficulties integrating new and legacy technology, and 51% believe their current technology fails to meet the demands of a rapidly evolving risk environment. Furthermore, only 19% of insurers are automatically incorporating external data into their pricing models.
This lack of integration and failure to address broader pricing ecosystems have led to significant inefficiencies, wasted skilled labour, and poor collaboration among underwriters, actuaries, and IT professionals.
On average, underwriters spend three hours a day manually entering data into systems. Additionally, 76% of actuaries require over a month to develop a new pricing model, with 14% needing more than a year.
Nearly half (48%) take more than 30 days to implement complex parameter and algorithm changes. Collaboration between actuaries and IT teams, a critical dynamic in the pricing process, is rated the lowest among inter-team partnerships, scoring just 2.7 out of 5.
The report also underscores the financial impact on insurers, with only 21% of actuaries and underwriters feeling that their current pricing technology allows them to make optimal data-driven decisions.
Furthermore, 45% see it as a barrier to maximising profitability, and 34% report a loss of business to competitors, up from 29% in 2023.
Amrit Santhirasenan (pictured above), CEO and co-founder of hyperexponential, noted that the insurance industry is lagging in technological transformation compared to other sectors.
He emphasised that while AI has significant potential, its true value can only be realised if insurers modernise their existing infrastructure. The current reliance on outdated and inefficient processes and technology is a major obstacle to progress, according to Santhirasenan.
“The message from both actuaries and underwriters is clear. They want to see significant operational improvements. Manual tasks like data cleansing and rekeying can be alleviated with the right pricing technology and rich data sets. This can also cultivate a more productive, collaborative and future-focused environment that gives insurers a competitive edge, priming them to take advantage of groundbreaking technological innovation such as AI,” he said.
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