The insurance industry, with its vast, complex network of policyholders, insurers, and intermediaries, heavily depends on precise and efficient communication of data. The sheer volume of data that needs to be processed necessitates that this data be presented in a standardised and easy-to-understand format. Two terms that play a crucial role in this standardisation, but are often confused, are the Core Data Record (CDR) and the Market Reform Contract (MRC). These concepts, while distinct, both contribute significantly to insurance processing and contract documentation.
Understanding Core Data Records:
CDR refers to a structured, consistent set of essential information about an insurance policy. The data contained in a CDR typically includes crucial information such as the policyholder’s name and contact details, the policy number, the type of coverage offered, the period of coverage, and other pertinent details.
The standardisation of this information in a CDR format ensures effective communication of data to automate processing within the Joint Venture (DXC / London Market Bureau). It forms the backbone of any insurance operation, offering clear, concise information that can be universally understood and actioned by all stakeholders.
Decoding Market Reform Contracts:
While the CDR is an all-encompassing concept, the MRC or Market Reform Contract, is a more specific element tied to the London Insurance Market. The MRC is a particular type of insurance contract documentation that aims to provide clarity and certainty in the contract formation process.
Introduced as part of the broader London Market Reform initiative, an MRC clearly outlines the terms and conditions of an insurance contract. This document also includes a contract data section that gives a comprehensive summary of the insurance coverage offered under the policy.
The London Market Reform aimed to modernise and streamline the procedures in the London insurance market. The implementation of MRCs marked a significant milestone in this initiative by ensuring clear, transparent, and efficient documentation of insurance contracts.
The Difference Between CDR and MRC:
The primary distinction between a CDR and an MRC lies in their scope and application. CDR refers to a set of essential data for premium processing and Lloyd’s regulatory reporting, presented in a standardised format. On the other hand, an MRC is the contract documentation used in the London Insurance Market, providing an overview of the policy’s terms, conditions, and coverage.
While both serve the essential function of streamlining communication and processing in the insurance sector, the MRC goes a step further by offering a comprehensive look at the contractual aspects of an insurance policy.
As we delve into the intricacies of the insurance industry, understanding key concepts like the Core Data Record and the Market Reform Contract can be invaluable. Both these concepts underscore the industry’s commitment to clarity, transparency, and efficiency, promising a smoother insurance experience for all stakeholders involved.
Novidea is committed to supporting the continued transparency and standardisation of the insurance industry. Helping insurers, brokers and policyholders stay better connected benefits everyone. The Novidea platform is built to better connect every stakeholder in the insurance value chain and make it easier for them to share information. Novidea knows the value this brings to the market and is ready to help brokers and insurers embrace these changes to help them deliver greater value to their customers.
You can watch the ‘CDR – How Brokers Can Prepare and What it Means for the Lloyd’s Insurance Market‘ Webinar here with Paul Evans, London Market SME, Novidea and Mike Winterle, Senior Product Marketing Manager, Novidea to learn more about how the CDR standardisation will enable the Lloyd’s market to significantly improve operations, reduce the cost and effort of doing business, and deliver a better service to customers.
As a result, offering greater value to capacity providers is more vital than ever for intermediaries. Indeed, in order to achieve the required outcomes, brokers, MGAs, and coverholders should look to advanced and emerging technology to help deliver the very business results, insurers want.
This article examines why scarce capacity is increasing the pressure on brokers, MGAs, and coverholders to provide ever more value to capacity providers. It then examines the challenges facing capacity providers in a rapidly evolving commercial lines market before highlighting how intermediaries can help to solve those challenges, thereby becoming trusted and valuable partners and beating their competitors in the war for capacity.
Thanks to the recent hard market, many insurers have returned to profit in the last couple of years. This is partly due to a reduced risk appetite and “through focusing on their core sectors, which they understand in depth and know from experience and data that they can underwrite profitability over the long term,” according to Towergate.
In other words, carriers continue to be selective with the risks they decide to underwrite. This means that intermediaries must be able to provide clear value — and prove that value — to compete for less capacity.
According to Marco del Carlo, CEO of Capacity Place and Director of the UK’s Managing General Agents’ Association: “Securing capacity for MGAs, particularly new MGAs, remains a challenging process with a lot of pitfalls. Each capacity provider has its own risk appetite in terms of classes of business and territories they write… Capacity providers seek to avoid duplication and competing against themselves and are generally seeking MGAs with a track record of underwriting profitability.”
Of course, insurance carriers are no longer the only game in town when it comes to providing capacity. In recent years, many MGAs have secured investment from private equity firms and alternative capacity from reinsurers. At the same time, PE investment has driven M&A activity in the US and UK broking markets since at least 2019.
According to the latest figures, however, both these sources of capital are also drying up. Private equity investment is down across the board, thanks to rising interest rates increasing the cost of capital. As a result, in 2022, “deal volume decreased 26 percent to $2.4 trillion, while deal count fell 15 percent to just under 60,000,” according to McKinsey.
When it comes to reinsurance, despite balance sheets looking robust at the beginning of 2023, reported capital declined by 14% in 2022, and Gallagher Re reports “a conspicuous absence of new capacity, despite the potential attraction of much-tightened pricing and terms and conditions.”
This means that intermediaries are competing for capacity in an uncertain market in which commercial lines carriers face several significant challenges: “These challenges are exacerbated by tightening capacity in both traditional reinsurance capital and alternative capital markets, and the full extent and duration of the capacity squeeze are still uncertain given the strong hardening observed in January 2023 renewals.”
The brokers, MGAs, and coverholders best able to help solve those challenges are the ones winning the war for capacity in 2023. The most successful intermediaries will be the ones that embrace modern technology to achieve their goals. There are solutions that can help them better vet clients and prospects to find submissions to send to insurers that are aligned with their risk appetite and, therefore capacity.
Challenges facing carriers in 2023.
Commercial lines insurers are facing a rapidly changing market. As McKinsey puts it: “Commercial carriers find themselves at an inflection point as they face a continuing cycle of economic uncertainties, including inflation, geopolitical headwinds, environmental challenges, and capital constraints.”
With record levels of inflation, rising interest rates, post-Covid disruption to supply chains, and weaker-than-expected economic growth in China, the global economy is uncertain.
The regulatory environment is becoming more challenging to navigate, as “many commercial insurance players are starting to find the regulatory landscape more fractured and complicated than ever before.”
According to KPMG, commercial insurers now see regulation as a bigger risk than any other, including crime and cybersecurity. Making sure they are leveraging a modern, secure cloud-based platform is a great way to ensure security and compliance.
New technologies are challenging insurers to improve the way they do business, from everything from underwriting more accurately to paying claims more efficiently. Then there’s the impact of environmental, social, and governance (ESG) principles. This is threatening brand reputations thanks to increasing scrutiny from activists highlighting greenwashing activities while also representing an emerging risk — both for insurers themselves and a potential new line of business.
Mixed in with all these challenges are several emerging risks, the biggest of which McKinsey identifies as: “natural catastrophes (NatCats), the net-zero transition, and supply chain and cyber risks.”
On top of everything already mentioned, the expectations of commercial lines clients have also never been higher. In a post-Covid world, everyone has become used to excellent levels of online service, and customers now demand the same from their insurance providers. This rise in direct, self-service insurance means that intermediaries need to utilize modern technology to deliver the instant customer service consumers are demanding. According to a Forrester survey commissioned by KPMG, 83% of prominent commercial insurance decision-makers list their customer-centric strategy as “a high or top priority.”
The urgent question facing intermediaries in this market is how they can become more valuable partners for their capacity providers, so let’s take a deeper dive into that.
How brokers can increase their value to insurance capacity providers.
It’s clear that insurers are keen to work with brokers, says Bob Pottle, chief strategic operations officer at Philadelphia Insurance Companies: “The independent agent and broker is really the backbone of the industry. They’re the primary distribution channel for commercial property casualty insurance.”
We know that insurers value those brokers who can provide insights into customer needs and trends. In a challenging market where the price of premiums has risen, capacity has contracted, and insurers are being more selective with risk, brokers must do more to unearth and understand new customer segments to help insurers see the potential profit in those segments.
Brokers can take advantage of modern software solutions to gain instant access to dashboards and reports to help discover the strategic insights their insurer partners are seeking. This, in turn, is valuable in helping carriers to price existing risks more effectively while also helping them to innovate by developing new products and serving new segments.
Carriers also value brokers’ expertise and client networks in specialty lines and emerging risks such as marine, aviation, and cyber insurance, where the experience needed to do a good job is highly specialized.
Plus, of course, leading brokers build a loyal customer base by using their expertise to provide their clients with tailored guidance on the right risk management strategies for them and minimizing their exposure to potential risks. Carriers highly value this affinity with customers and are more likely to commit capacity to those brokers with an excellent track record of building a loyal base of repeat customers.
This means that those brokers who can build the biggest base of loyal commercial lines clients in order to:
● provide the best and most accurate market data around new client segments and emerging markets,
● offer the most accurate information, and
● help develop new and profitable products,
will find it easiest to secure capacity from grateful carriers.
How MGAs can increase their value to insurance capacity providers.
MGAs have benefitted to some extent from the hard market, as they have been able to specialize in underwriting new and emerging risks where commercial line carriers lack the necessary expertise. Yet, even though specialty MGAs can reduce the risk of market entry for insurers while also providing them with pre-existing underwriting specialist talent and bringing insurers profitable business at a fraction of the overheads of doing it themselves, securing capacity can still be a struggle.
The answer is for MGAs to ensure they can prove their value to capacity providers. According to Martin Hall, Chief Underwriting Officer of Pen Underwriting: “Access to distribution and expertise in niche classes of business are the two key advantages [for carriers of working with MGAs], but successful MGAs are also synonymous with the strength and longevity of customer relationships, robust performance monitoring, and investment in meaningful management information, all of which are highly valued by carriers.”
So, robust data around performance and the ability to present it to carriers is critical for those MGAs who want to stand out from the crowd and build stronger relationships with insurers. Having real-time, high-quality data processes and insights allows MGAs to make better underwriting decisions faster and scale without needing to hire many extra people. There are software solutions that can help brokers achieve this with real-time insights and actionable intelligence into the performance of their operations. With the correct management information (MI) to hand, MGAs can react more quickly to changing market conditions as well as adjust premiums, underwriting criteria, and coverage accordingly.
How coverholders can increase their value to insurance capacity providers.
Lloyd’s coverholders face very similar challenges to those of MGAs. According to Deloitte: “Delegated propositions and distribution that lack a niche will lose attractiveness to capacity providers and may prove ineffective or uneconomical to MGAs in the market.”
One way for coverholders to set themselves apart is to ensure they fully understand the risks they choose to underwrite — and can demonstrate that understanding to their existing or prospective capacity providers.
According to Charles Taylor: “Coverholders will need to prove they understand and are able to manage the risks if they are to convince their capacity providers they merit ongoing support. For the capacity providers, if they are in Lloyd’s, being able to evidence that understanding will go a long way should they wish to extend the scheme and increase the capacity. The primary market will also need to reassure their reinsurance partners they understand the business when it comes to their treaty placement.”
As we’ve already seen, carriers want to know that their coverholders are bringing in the right business with the right margins, usually by leveraging the specific expertise that the carrier lacks. What they want most of all is proof that they can trust their coverholders to continue to underwrite risks profitably. This is part of the process when future-proofing a relationship.
How Novidea can help
The common thread in a lot of the challenges we’ve explored is data. Clearly, to help provide extra value to insurance capacity providers — as well as prove it — brokers, MGAs, and coverholders must be able to collect, cleanse, and analyze data to a much greater extent than ever before. For some, this will involve finding ways to digitalize existing processes and collect client and carrier data in one place where it’s possible to get a 360-degree view based on client, policy, insurance capacity provider, or line of business. This requires some level of agility within operations but also the internal flexibility to adapt practices to deliver on required revenue targets.
As Howard Lickens, CEO of Clear Insurance, puts it: “Brokers have data sitting in pockets all over the place and never being reconciled. There must be huge efficiency gains but also extra insights that can be gained from all this data. The chaotic way that commercial brokers have been managing their data should not continue. Tech is fundamental.”
Let’s take a look at the ways Novidea helps intermediaries to make better use of their data, which not only helps them to provide more value to insurance carriers but to prove it too.
❖ Integrates all data into one location.
With the Novidea platform and its modern, open architecture and robust APIs, companies can integrate all their customer, policy, and client data in one place. This includes being able to access data from CRM and the Insurance Distribution Platform. As a complete end-to-end solution, companies can integrate every part of the insurance distribution life cycle from quote to claim.
Because Novidea is a secure cloud-native platform hosted on Salesforce, this also means companies can flexibly access that data securely from any device in any location.
“There is a big advantage to collecting data in consistent ways and bringing it together. There are so many types of analyses that can be done that you can only do when you get the data organized first. When you have a really good data set at your fingertips, as a broker, you are then transformed, and your role becomes more valuable.” Ben Rose AON Inpoint
❖ Optimizes performance management and profitability analysis.
The platform offers visibility into all key business metrics. This means that managers can track employee performance or underwriting performance, as well as the profitability of specific policies, clients, or business lines — all in real time.
Integration with Outlook offers automated time-tracking of customer hours, including meetings and travel. Companies can generate profitability reports based on salary costs, commissions, and customer analysis to prioritize resources effectively. The automated cross-sell and up-sell module suggests relevant product recommendations based on client needs.
“Novidea puts a lot of valuable insight information at our brokers’ fingertips, enhancing their ability to sell and advise customers in a way that is both efficient and lucrative for our business.” José Manuel González, Howden Iberia
❖ Boosts underwriting efficiency.
Novidea’s platform calculates premiums and assesses risk, and generates comparison quotes while also providing all necessary document management, workflows, and underwriting functionalities to take out the repetitive tasks involved with the process. This frees up underwriters to focus on what they do best — underwriting. The easy access to data also ensures that underwriters have all the information they need, never more than a few clicks away.
Novidea’s platform enabled us to streamline policy lifecycle management and provide unprecedented real-time visibility and control of every aspect of our business. It is a holistic solution that enables us to compete in an ever-changing, dynamic environment and grow our business. Shai Simkin, Managing Director, Howden.
❖ Offers excellent data visibility, transparency, and actionable intelligence.
Companies get real-time secure access to clients’ data at the point of need across the entire insurance lifecycle, along with analytics and dashboards for real-time insights into clients, policies, carriers, and more. So, they can see the bottom-line impact and value at a glance.
Data-driven analytics delivers personalized experiences, boosting leads and customer retention.
At the same time, pre-built report templates mean that brokers, MGAs, and coverholders can quickly and easily create custom reports from any data field across the entire platform.
“Novidea’s Brokerage Management Platform enabled us to revolutionize our working patterns. It has helped streamline the policy lifecycle management and visibility across every aspect of our business. It is a holistic solution that enables us to grow our business easily without growing in human resources.” Shay Simkin ACII, Managing Director, Howden Israel
❖ Helps improve customer service.
With easy access to client, policy, and carrier data, brokers can offer the best value and most relevant products to clients anywhere in real time. They can also launch products directly to clients using a self-service portal that tracks client activity, engages clients, and allows them to request changes to their accounts.
“It’s important to us that we can keep up with our growth through the data that we are collecting, in conversations with clients, adding value as we bring new MI to our clients, reaching into the data to see opportunities to cross-sell or up-sell.” Lyn Grobler, CIO, Hyperion Insurance
Brokers, MGAs, Coverholders: Are you ready to increase your value to capacity providers?
Many brokers, MGAs, and coverholders quoted in this article use technology to transform how they use data in their businesses, boost underwriting performance, offer unparalleled customer service, and track the impact on their bottom line. They need access to capabilities that have been future-proofed to drive growth and ensure the resiliency of their business.
All of this helps them to build more compelling and valuable propositions and flexibly manage portfolios of business based on the value generated by each book while increasing the amount of capacity they have access to safely in an otherwise difficult market.
An industry cloud platform is a collection of cloud-based or cloud-native solutions designed for a specific industry. Industry clouds differ from the broader, general-purpose cloud platforms like Amazon Web Services (AWS) or Microsoft Azure because they offer solutions, features, and capabilities that are customized to match the specific needs of industries such as healthcare, finance, logistics, retail, energy, agriculture and others.
The most significant benefit of an industry cloud is the ability to meet an array of specific needs with features like workflow automation, data storage and analysis, processing and auditing tools, self-service customer portals, and more. As Deloitte explains, “Industry clouds can help accelerate the development of industry-specific digital solutions to build a continuously evolving digital core, on top of which you can layer capabilities to help you modernize and innovate—one tech capability or business use case at a time.”
While the insurance industry has been slower than some to adopt these technologies, cloud platforms designed for insurance are starting to emerge. The digitalization of the industry is already underway. Which platforms will take the lead, and which businesses will take advantage of them first?
First and foremost—what are the potential benefits of an effective insurance industry cloud platform?
Enhanced operational efficiency
The right industry cloud solutions stand to revolutionize the way insurance companies operate, providing a scalable and flexible digital infrastructure for their systems. By migrating operations to the cloud, insurers can reduce the burden of managing on-premises infrastructure and focus more on core competencies.
Through integrations, a cloud platform can enable seamless collaboration, eliminating geographical barriers and allowing teams to access and share critical data and applications from anywhere, anytime, on any smart device. This allows for real-time communication and decision-making, enhanced by easy access to data and analytical tools.
Where human insight and decision-making aren’t needed, a cloud platform can also increase efficiency through automation. By automating repetitive tasks, insurers can free team members to focus on what they do best, increase service and processing speeds, and eliminate potentially costly human error.
It stands to reason that enhancing operational efficiency can save insurers by reducing labor costs and improving resource utilization. The scalability of cloud platforms enables insurers to quickly scale their resources up or down based on demand, further reducing costs. Additionally, cloud platforms can greatly reduce the need for physical storage, cutting costs associated with maintaining and securing on-premises data centers.
By leveraging cloud infrastructure, insurers can reduce capital expenditures on hardware and software, as cloud providers handle infrastructure maintenance and upgrades.
Moreover, a pay-as-you-go pricing model can allow insurers to purchase only the resources they use, eliminating overprovisioning.
Improved customer experience
An effective insurance cloud platform will equip insurers to create seamless experiences for customers, allowing them to interact through multiple channels, such as mobile apps, websites and chatbots.
Cloud-based customer relationship management (CRM) systems can give insurers a comprehensive view of customer lifecycles. Automated analysis of customer data can provide insights into customer preferences and behaviors, enabling targeted marketing, personalized offers, and more accurate risk assessments.
Additionally, cloud-based analytics and machine learning capabilities can allow insurers to quickly process vast amounts of data, improving the speed and accuracy of underwriting and processing and reducing the time and effort required for customers to file and settle claims.
All this stands to boost customer satisfaction and retention, as well as creating new opportunities for acquiring new customers.
Increased flexibility and innovation
Key to success in our industry is an insurer’s ability to quickly innovate and adapt to changing market conditions. The cloud platform can facilitate the rapid deployment of new products and services, helping insurers to stay ahead of the competition.
With the ability to scale resources in real-time, insurers can handle surges in demand during peak periods, such as open enrollment periods or after natural disasters. The cloud also facilitates integration with external data sources, such as weather data or telematics, enabling insurers to offer usage-based insurance and personalized risk assessments.
What’s more, cloud-based ecosystems and marketplaces allow insurers to collaborate with insurtech startups and other industry partners, fostering innovation and driving the development of new products and services. An effective cloud platform also enables insurers to experiment with new technologies—such as blockchain or artificial intelligence—to enhance their operations and create unique value propositions for their customers.
Data security and compliance
As promising as the digitalization of the insurance industry is, it is also creating new challenges regarding data security and regulation compliance. To address those challenges, an effective insurance cloud platform will provide advanced security measures, including data encryption, access controls, and regular backups, all to ensure the protection of sensitive customer information.
The right cloud providers will also invest heavily in maintaining robust security frameworks that comply with region-specific regulations.
Early adoption of an industry cloud platform can give insurers an advantage in the marketplace. It can drive innovation, boost efficiency, help meet evolving customer expectations and generate new growth opportunities. Insurers looking to get a head start should work with their CMOs, CIOs, CTOs and chief digital officers to assemble a clear picture of what exactly they will need from an industry cloud platform. They should question potential providers about the flexibility of their solutions and the level of support they can expect during and after implementation. And, crucially, they should ensure the platform is sufficiently modular to accommodate new solutions as our industry continues to evolve.
For example, an open API infrastructure is essential for insurance organizations that want to leverage an industry cloud. APIs are the facilitators of insurance technology ecosystems, enabling your technology and systems partners to connect and collaborate.
ITC Europe’s Digital Insurance Agenda was back in force at Barcelona. It was exhilarating to visit and spend three great days getting to grips with all the latest developments in the word of insurance technology – even if most attendees and speakers spent much of the time talking about generative AI!
To begin, there was a great mix of over 2,000 InsurTechs, MGAs, and insurers at the event, and so many insightful experts – more than 100 speakers over the three days – that it was hard to take in all the great content.
With that said, there were some clear takeaways that I got from the event to share with you that were both relevant and thought-provoking.
ChatGPT has opened up the AI agenda
Ever since the launch of ChatGPT at the end of last year, discussions about generative AI have dominated every tech event around the world. It was no different here.
There was a real buzz around the discussions; journalists were asking questions, attendees were looking for answers from speakers, and the excitement was palpable.
Taking a step back, it seems that there are few active use cases of generative AI in insurance in the public eye. But the buzz around it has definitely increased awareness of the possibilities and potential benefits. The feeling I got from the event was that industry executives who had previously been hesitant about AI are now much more open to discussions.
In terms of AI on the Novidea platform, Salesforce has its own Einstein GPT – the world’s first generative AI for CRM. Because Novidea is built on Salesforce, we’ll soon be looking into the possibilities offered by this technology and talking to our clients about potential use cases.
According to Salesforce: “Einstein GPT will infuse Salesforce’s proprietary AI models with generative AI technology from an ecosystem of partners and real-time data from the Salesforce Data Cloud, which ingests, harmonizes, and unifies all of a company’s customer data.
“With Einstein GPT, customers can then connect that data to OpenAI’s advanced AI models out of the box, or choose their own external model and use natural-language prompts directly within their Salesforce CRM to generate content that continuously adapts to changing customer information and needs in real time.”
We will be talking and publishing more about this as use cases come into fruition.
MGAs gaining appreciation in the market
MGAs have been gaining more importance and influence within the insurance market for a while now. What was clear from the DIA event was the extent to which MGAs are now accepted as mature market players. It’s not just about disruptive new InsurTechs entering the market with a commoditised offering. Carriers recognise the value that MGAs bring – especially those with niche expertise – as key distribution partners in the value chain.
Munich-based Apinity was one of the sponsors at the event. This impressive company offers an open API marketplace, and it got me thinking about the potential for Novidea to develop something similar for our clients.
We’re always looking to improve our development and delivery processes, and this approach could help us to do just that. Something I was still thinking about on the plane back from Barcelona – watch this space!
InsurTech funding trends
Besides the hype around generative AI, any InsurTech event will of course be dominated by discussions of funding trends, and DIA/ITC was no exception to this as funding is a big topic for our industry.
InsurTech funding hit record-breaking highs in 2021, with 564 deals totalling $15.8 billion – more than the total funds invested in 2019 and 2020 combined.
Yet, even though that was less than two years ago, the narrative since 2022 has been much more negative, with inflation and rising interest rates stymying the traditional venture capital model and cutting off capital flows into the sector. Funding dropped by 50% in 2022.
It’s not all doom and gloom though. Deals are still being done and new startups and scaleups are still attracting investment. It’s all just a lot less exuberant. From the discussions I was privy to at the event, I picked up on a few interesting trends.
VCs are getting choosier about what business models they invest in and why. Funding is getting harder to find of course, but this is not news. It’s been that way ever since Silicon Valley Bank went bust, the listed InsurTechs in the US share prices plummeted and interest rates started rising dramatically.
With interest rates remaining high – and still increasing in some countries – investors are now much more focused on a route to profitability over pure growth, which was the previous obsession.
Apparently, valuations of InsurTechs have gone from up to 20x revenues to more like 2x revenues. This seems exaggerated but it does prove that valuations are way down and that young startups are finding it almost impossible in many cases to get funding compared to two years ago.
On the flip side, InsurTechs with a strong value proposition, top team, and clear route to profit can still get funding. Novidea, for instance, gained series C funding of $50 million earlier this year.
One result of this is that InsurTech MGAs are now becoming more popular investment targets than full stack propositions. This is partly because MGAs are more likely to either already be profitable or be close to achieving profitability, but it’s also because regulation on full stack propositions are seen as too cumbersome. It adds to the costs, it adds to the risk, and it takes longer for those companies to get set up.
The rise of stellar MGA performers internationally, such as ManyPets in the UK or Cowbell in the US, are two clear examples of the huge profitable growth potential for well-run MGAs who really know their niches.
Further, it’s notable that carriers have significant capital to invest, meaning we might expect more partnerships in the InsurTech space as insurers look to increase their return on capital by finding InsurTechs with great potential.
Discussions at the event with insurers suggested that early-stage start-ups are more difficult to integrate with. When they grow, they can struggle with culture, and that pressure leads to their downfall. Execution and culture are likely to play a huge part in which ventures insurers invest in.
For many insurers, the talk was around how many InsurTechs do not invest enough in product development. There was also a lot of discussion around how InsurTechs leverage their assets and customer-base to launch new products that are right for them and help them continue on their trajectory. Some felt that there was not enough of a conversation going on between the product teams and the end-clients.
The other trend discussed at the event was the noticeable increase in digital adoption amongst insurers post-Covid. Now that customers have become more used to relying on digital products and services, insurers are having to respond to this shift in customer demand and going all-in on digital.
What this means for Novidea and our customers
This was a really mixed event for us at Novidea. It’s exciting to know that we’ll be looking into use cases for Salesforce’s generative AI, while also looking into creating our own API marketplace equivalent. At the same time, it’s good to see that digitalisation is increasing across the industry.
Of course, the more carriers that go fully digital, the more onus there is on brokers, MGAs, and coverholders to keep up. Having a best-of-breed IT platform is becoming necessary for doing business with increasingly digitalised clients, partners, and carriers.
If you’d like to discuss your digitalisation or data challenges, feel free to get in touch to see how we could help.
The insurance industry is on the brink of a digital revolution. In early 2021, Lloyds announced the required implementation of the Core Data Record (CDR), a bold initiative to streamline and standardise the collection of critical transaction data. Designed to be collected at the point of binding, the CDR propels downstream processes such as premium validation and settlement, claims matching at first notification of loss, tax validation and reporting, as well as regulatory validation and core reporting.
What is the Core Data Record (CDR)?
CDR aims to boost operational efficiency, reduce business costs, and improve customer service. The record, consisting of 37 mandatory and 180 conditional mandatory fields, forms a comprehensive databank that can drive insurance processes more effectively. It is required across both the Lloyd’s and regional markets.
With CDR, the data — whether applicable at a section level or requiring a more detailed entry — can be processed and stored, creating a transparent system where the use of each data element is explicitly stated, fostering accountability, accuracy, and efficacy.
The Challenges and the purpose of CDR
Though the initiative promises to be beneficial, the integration of the CDR comes with its own set of challenges. The transition to this standard necessitates a complete rewrite of back-office data structures — a costly and labour-intensive endeavour. In addition, the success of CDR hinges on the accuracy and comprehensiveness of data collection, posing a challenge to brokers, MGAs, agencies, insurers, and service providers — with the responsibility for ensuring the capture and accurate entry from the client into the Market Reform Contract (MRC v3) and a placement platform, typically being held by the broker.
The CDR’s introduction also marks a significant shift in the insurance landscape from people-centric, manual processes to data-centric, automated ones. Traditional methods of data storage and management, often involving Word documents and email exchanges, are no longer sufficient. This shift underscores the need for technologies that can effectively capture, validate, and update the data required by the CDR standard.
How Novidea can help
Novidea, with its innovative insurance management platform, offers a comprehensive solution to the challenges posed by the advent of the CDR. The Novidea platform, built on Salesforce and equipped with automated workflows and open API architecture, allows for the consolidation and integration of data across front, middle, and back offices. This seamless data accessibility and digitisation enables brokerages to easily become CDR compliant.
Unlike legacy systems, Novidea captures and maps data within the front office of its system, where it can be validated and updated throughout the placement process. This eliminates the need for rekeying as data is smoothly transferred to the middle and back offices. Moreover, Novidea’s low-code environment and drag-and-drop field creation simplifies the transition, thereby reducing the resource and headcount effort, and costs associated with CDR compliance.
Beyond just compliance, Novidea’s data analytics offer micro and macro views of your business, facilitating better decision-making insights. Its fully customisable customer-focused system, streamlines the entire distribution lifecycle and optimises processes across your business.
As we move towards the upcoming mandate set for Q3 2024, Novidea stands ready to support London Market Brokers in their Blueprint 2.0 requirements. With Novidea, you can navigate the challenges of the CDR, optimise operational efficiency, and scale your business in a future-ready manner. Let Novidea’s insurance distribution platform guide you through the digital revolution of the insurance industry.
In conclusion, Novidea not only allows for easy adaptation to the CDR but also paves the way for meeting future technology requirements as part of the wider Blueprint 2.0. Through digitization and enhanced data management, Novidea propels the insurance industry towards a more efficient, customer-focused future.
There was a time, not so long ago, when businesses were nervous about depending on the cloud. Today, that has all changed (source Forbes), and most technology vendors are positioning themselves as being in the cloud.
So, what’s changed?
Some would argue that the Covid pandemic was the driver. And whilst it’s true that the need to work remotely accelerated the adoption of cloud-based technologies, big tech providers like Salesforce (150% 2016-2020 growth) had already made great in-roads into forward-thinking businesses.
Further, most organisations across all sectors now expect to significantly ramp up adoption and migrate a growing share of their IT environment to public cloud, with a projected 32% annual growth in cloud services by 2025 (source McKinsey).
What does ‘born-in-the-cloud’ actually mean?
True born-in-the-cloud solutions come with powerful benefits over the retrofitted legacy approach. This blog aims to explore how these can help our sector, from insurers to agencies, brokers, and MGAs, to improve operations, reduce costs, and increase revenues.
At its simplest, born-in-the-cloud (or cloud-native) solutions are those that have been entirely designed, built, deployed, and managed within a cloud computing environment. Novidea is an example of this approach since it was built on the Salesforce SaaS platform.
Many insurance technology vendors claim to offer cloud solutions, but when you examine them more closely, solutions that are labelled as ‘cloud-based’ are often little more than legacy off-premise offerings that have been retrofitted to be available remotely.
This happens when legacy software providers skip the time-consuming and expensive rebuilding of their applications for the cloud and instead create web-based, front-end interfaces that are still attached to legacy application architectures in the back end.
True cloud-native software delivers a lower total cost of ownership, zero maintenance for you as the customer, automated product updates, elastic computing power that increases and decreases according to a business’ needs, and seamless integration with other cloud-based systems.
Cloud- Native – the benefits
If you want to be sure that your organisation is leveraging cloud-native software, ask yourself whether you are benefitting from these four areas:
Scalability: A cloud-native insurance platform allows users to increase or decrease their usage based on their changing needs – without the need for any additional hardware or any software downloads. For instance, if an MGA needs more computing power because they’ve just partnered with a new underwriter, a cloud-native platform can scale up to accommodate. Alternately, say a broker offers a top new cyber product, a cloud-native platform can expand as needed to meet increased demand.
Cost-effectiveness: The users’ hardware and maintenance costs are all wrapped up in the monthly SaaS subscription fee, meaning you never pay for more capacity than you need.  Also, with cloud-native software you get instant access to the latest features and enhancements developed by the vendor.
Working on the move: A cloud-native platform is accessible from any device, anywhere, with a good internet connection and the right security access. Brokers and agents can download documents, such as claims and premium data, to their phone and make deals in clients’ offices without needing to contact their own office. Claims adjusters can enter clients’ risk profile details in real-time from any claims location with just a few clicks. MGAs can agree new capacity deals with carriers without needing to head back to their desk. This is insurance on the move, and only a true born-in-the-cloud platform enables this level of flexibility and accessibility.
Iron-clad security: True born-in-the-cloud platforms come with top cyber security measures that ensure you are 100% compliant with all customer and client data privacy legislation in every jurisdiction in which you operate. The chances of losing client data or being hacked are incredibly remote. Salesforce, for instance, has security built into every layer of its platform. The infrastructure layer comes with replication, backup, and disaster recovery planning.
Born-in-the-cloud, now six years old: Novidea’s insurance platform was born-in-the-cloud in 2017, and built on Big Data firm Salesforce’s platform. It took time, focus, extensive resources and specialist expertise, along with our insurance market know-how.
Book a meeting now to discover why we now have over 100 customers in 22 countries enjoying the above benefits. You can too, while effectively managing the entire customer journey, end-to-end, with greater operational efficiencies, reduced costs, and accelerated growth.
While not new to the insurance industry, the proliferation of digital technologies and the increasing availability of structured and unstructured data has exponentially increased the use cases for data and analytics.
Today, these include new forms of risk analysis, which are driving revenue growth, reducing fraud, and increasing operational efficiencies.
Data-driven decision-making helps not only underwriters, but also agents, brokers, and MGAs to grow into new markets while boosting profitability. Here are some of the most compelling ways insurance firms throughout the value chain are using data and analytics:
1. More accurate risk assessment and underwriting
Ever since the industry’s origins in the 1600s, underwriters have used the available data to analyse and predict the likelihood of certain events. Back then it was the odds of merchant ships arriving back in Europe loaded with tradable goods.
In the centuries since, data usage has transformed to incorporate almost every type of risk, including those that are new or rapidly evolving, such as natural catastrophe and cyber security. Fast-moving risks like this require huge volumes of data and the ability to collect and analyse them in as close to real time as possible.
MGAs are increasingly combining specialist market knowledge with sophisticated risk models to underwrite new business more profitably than many carriers can. Brokers and agents are also benefiting from the ability to sell a wider range of more specialist products into new markets, worldwide.
2. Driving business growth
We have seen how MGAs are able to use their specialist knowledge to drive business growth by winning capacity from carriers in new emerging or fast-moving risk types, such as cyber and niche SME business. The same is true across the value chain, where those insurance firms with access to more data – and the ability to analyse it – can either win business from their competitors or else carve out new, under-served markets.
Many brokers and agents are using data and analytics to improve customer retention through relevant cross-selling and identifying better value products for clients at renewal. Those insurance firms with cloud-native insurance platforms are also better able to segment their customers and tailor their offerings and marketing messaging.
Many InsurTechs and tech-savvy carriers are also analysing customer data to devise more appealing and appropriate products for specific customer segments. Embedded insurance is another way carriers can meet their customers at the point of sale by offering insurance products through new channels or by bundling it in a product experience.The London market is seeing a lot of this sort of innovation in the commercial space, while carriers in emerging markets are developing new products for small businesses and communities who have lacked competitive tailored coverage up to now.
3. Improving claims ratios
With escalating claims inflation, reducing claims where possible is sure to be as important as ever. Many carriers are increasingly using sophisticated data analysis to spot fraudulent claims, eliminate higher risk customers from their books, and process genuine claims faster and more efficiently. Some are even going one step further by leveraging IoT or wearables to collect even more data to better drive their decisions. All of this is leading to lower claims costs and improved ratios. MGAs’ sophisticated underwriting models are also in many cases leading to better claims ratios.
4. Optimising operations
Another way many insurance firms across the value chain are using data is to improve operational efficiency. Analysing data from various business processes allows firms to identify bottlenecks and inefficiencies and implement changes to eradicate them.
Overall, the use of data and analytics in the insurance industry is increasingly essential for informed decision-making and improving business performance. However, many legacy brokers, agents, and underwriters suffer from operating multiple systems and data silos, making customer data harder to access, harder to analyse, and harder to keep secure.
This is why so many fast-growing companies within insurance are increasingly looking to consolidate their data and systems onto a single, modern cloud-based insurance platform.
Get in touch today, to find out how Novidea’s born-in-the-cloud insurance platform, built on Salesforce, can help your business grow revenues and optimise operations, through better use of data and analytics.
It was great to be back at BIBA this year. The exhibition hall was busier than ever, with a fantastic, diverse portfolio of products and services, and a stellar line up of content in the main auditorium and around the fringe. It’s one of the few events that really brings together every element of our value chain – brokers, insurers, actuaries, platform providers, infrastructure, and security – all with a common goal of delivering service excellence to customers.
The BIBA Insurance Conference is one of the largest and most significant events in the insurance industry’s calendar each year, with a record of over 9000 people through the doors of Manchester Central; a real triumph for Steve White and the entire BIBA team.
For the Novidea team, out in force with a stunning stand to match, it was the perfect opportunity to mix, mingle, and meet prospects keen to learn more about the latest from the insurance tech space. I am happy to say, our stand and born-in-the-cloud platform got lots of attention. Having some big-name client logos, such as Gallagher and Howden, definitely made a difference from past years.
The conference featured keynote speeches, most notably from Steve White, who announced that after 10 years in the role he would be stepping down as BIBA chief executive. Everyone agrees he leaves the organisation stronger than ever.
The agenda spoke of a wide range of topics, covering the ever-growing regulatory challenges, managing emerging risks, cyber security, platform interoperability, customer excellence, and professional development for brokers.
Specialty brokers – in the know
I could have been because of my previous roles in the London Market, but I got a strong sense that there was an increased presence from the sector this year.
We all know the major incumbents who have a broking footprint in these markets, with Gallagher and Ardonagh again showing the sector their brands and direction of travel. Interestingly, this was also the first time Gallagher exhibited as a Retail group, not as the individual well-known brands of Deacon, Intasure, etc.
I also spoke to more traditional specialty brokers this year, looking to learn from outside of their day-to-day processes, from a more automated, electronically traded value chain, especially with the growing trend in the London Market of facilitated risks and lineslips for the higher volume, lower premium books of business.
One of the markets friendliest of brokers, Max Odlum of CJ Coleman, said to me, “BIBA is such a great way to make new connections and learn about the developments in the Retail sector. The fact that brokers are encouraged to attend such a large event for free makes it a really attractive proposition for brokers in the Specialty space and gives us a great way to meet with existing clients and find new opportunities.”
The bigger picture
A major hot topic right now across the industry is ESG (Environmental, Societal, and Governance), and there was much said about it, including this BIBA report. Zing365 presented an excellent session highlighting that ESG is not a catch-all and that we cannot think about one without the other(s). Whilst many organisations understand the wider impact of the ‘E’, we all need to be paying more attention to the Social, Governance elements, in particular, reducing the protection gap, company tax strategies, and transparent pay reporting.
More regulation is coming, so be prepared.
For me, the standout session of the event was Thursday morning’s keynote, chaired by Fearne Cotton, discussing mental resilience. Many of the audience were not expecting such an open and inspirational discussion from the panel and, fair to say, so much emotional input from the audience at the end.
Mental health and resilience are such important topics, particularly off the back of Covid. Today, end-customers feel that the world is back to normal and high levels of service are expected from call centres/staff, etc. In reality, however, people are still working in hybrid mode and there is a big disparity between expectation and reality of teams.
Companies who drive an open and engaging culture are clearly going to produce better service to their customers. Some firms are actively getting their teams back into the office, whilst others are still in a phase of transition, seeing the benefits of a more flexible approach.
There is no right or wrong here, but there are some areas clearly suffer without an on-site model of on-the-job training to expand knowledge and share insights within a collaborative culture.
Whilst I am a very big fan of the hit HBO show ‘Industry’, BIBA’s Young Broker Day did a far friendlier and engaging set of sessions on the topic of the world of work in insurance.
The issue of talent acquisition and succession planning has been a hot topic in more recent years in the London Market, and whilst many organisations are making great strides, I always feel that the Retail sector seems to have a better grasp on the issue.
Naturally, the regional offices offer a wider, physical opportunity to people across the UK, unlike the London Market with it’s Lloyd’s nucleus.
The retail sector seems well engaged with the next generation of insurance specialists, with access to local talent from varying levels of education.
I can attest to this myself, growing up in Bournemouth my route into the insurance sector was through the retail space, with the likes of Liverpool Victoria, Rias and AJ Gallagher brands like Insure 4 Retirement and Deacons).
And last, but by no means least: regulation! The stringent requirements now demanded by the FCA across the insurance sector are proving to be a challenge for everyone, but more so for the smaller brokers, which can be less well-resourced in compliance and without the financial capability for enterprise data and reporting tools.
With the Consumer Duty changes coming into effect from July 2023, ESG reporting for smaller firms and the expected improvements to mental health training / reporting from the government is a very real and tangible issue that the UK market is facing, despite the fantastic lobbying work BIBA does on its behalf.
How can Novidea help?
Fortunately, Novidea is well placed to support our customers with many of these focus areas, including 360 views of your portfolios with intelligent insight features out of the box, supporting a changing workforce where broking on the move is as important as ever, and easy to configure regulatory reporting for the FCA.
Novidea’s born-in-the-cloud broker platform offers clients and their policyholders access to UX-focused interfaces, complex scheme rating, and a platform that manages everything from enquiry through to financial billing.
If you would like to know more, feel free to get in touch and see what Novidea could do for your business.
MGAs have become an increasingly vibrant and innovative part of the global insurance market, often addressing niche or underserved markets. McKinsey estimates that there are 600 MGAs currently operating in the U.S., and 300 MGAs in the UK. And these numbers are growing.
Their role in the insurance industry is providing another vital, cost-effective distribution channel for carriers and specialist solutions and products for customers in specific insurance lines, such as management liability (like D&O or EPLI), Product Recall, Flood, Specialty Insurance, Transportation, Work Compensation are some other common examples.
MGAs also provide access to isolated geographic areas. An insurer may want to write business in a remote location, but don’t want to spend the money and resources to open an office there. With an MGA they can gain access to these markets without having to open an office or hire staff.
Indeed, MGAs play an especially important role across a variety of commercial lines, where their specialty market expertise means they can identify and underwrite emerging risks more profitably than mainstream insurers, who find it more difficult to target niche markets.
The three most common types of MGA in today’s market are:
Underwriting-led: MGAs founded by experienced insurance specialists to capture a niche in the market not currently well served
Technology-led: MGAs that have acquired capacity and are writing business for commoditised lines where they can offer higher margins due to having lower operating costs and new methods of pricing
Service-led: companies that are offering a range of services in a specific niche, of which specialist insurance cover is a key part
In the US, the majority of focus is on the second category: those technology-led MGAs who can write commoditised lines at a higher margin than the competition. In the UK market, categories one and three are more numerous.
In all three categories, technology is facilitating more rapid growth. Although MGAs have been growing in importance and influence over the years, they are still young businesses by insurance industry standards, and so most of them lack the same constraining legacy technology that holds back many larger, incumbent carriers.
Even traditional underwriting-led MGAs are therefore leveraging technology to streamline their operations and – in many cases – augment their pricing models.
Those consumer-facing MGAs enjoying the most robust growth are those that enable customers to handle everything seamlessly online. One standout example is the UK-based MGA ManyPets, which hit a valuation of $2 billion in 2021 following rapid growth in its customer-base throughout the Covid pandemic.
Let’s take a deeper dive into how MGAs are using technology to drive growth, according to recent research from McKinsey:
Many MGAs are using artificial intelligence or machine learning to automate routine tasks and improve efficiency. This can include automating underwriting processes, risk assessment, and claims handling. By automating back-office processes, MGAs can operate much more efficiently.
Consumer-facing MGAs are using digital platforms to interact with customers, agents/brokers, and carriers. These platforms enable MGAs not just to provide online quotes, but to issue policies and even handle claims digitally. In this way, they are the equal of even the largest incumbent insurers. What’s more, MGAs in specialty lines are increasingly offering this kind of slick all-in-one digital service to commercial clients too, cutting out the need for printed paperwork altogether and speeding up sales cycles.
MGAs are using data analytics in several ways. Obviously, for any MGA, their single most important client is the carrier which gives them capacity. As Insurance Insider puts it, “Insurers now see MGAs as part of the strategic direction for their business. They are not as nimble as they would like to be, so working with an MGA gets access to new markets and helps develop new products.”
The savviest MGAs are therefore using analytics to track the kinds of business that would be most beneficial for their carrier partners, and to prove where they are adding the most value – a crucial competitive advantage in a hard market where spare capacity is beginning to dry up in many lines.
Secondly, MGAs are using data analytics to develop more responsive and more accurate pricing models, allowing them to underwrite the better risks at higher margins, as well as develop products for more specialist risks, such as cyber.
Thirdly, MGAs are using data analytics to look at more granular segmentation of customers and offer coverage that better suits their needs – and their pockets.
Many MGAs have obtained their competitive advantage through use of a born-in-the-cloud all-in-one insurance platform like Novidea’s. If you are an MGA looking to work with the best, why not have a conversation with one of Novidea’s insurance platform experts?
If you’re a broker or agent that wants to work with a technology-driven MGA, why not get in touch and see what Novidea could do for your business?