Deloitte’s Johal: Data and new technologies will create a greater focus on underwriting and portfolio analysis

The industry needs an increased focus on the use of data and new technologies to help improve the focus on underwriting and portfolio analysis, particularly given the reinsurance capacity challenges seen previously, according to Deloitte's Guru Johal.

In a wide-ranging interview with The Insurer TV at the Rendez-Vous in Monte Carlo, Johal, who serves as vice chairman and global speciality and reinsurance leader at Deloitte, also underlined the importance of not losing focus on the non-catastrophe lines of business.

“In the reduction of appetite in short-term volatility it is important to remember the long-term volatility of other lines of business. A lot of focus historically goes to nat cat given the headlines and the quantum of these losses. What is clear, talking about modelling more generally, is that focus is also needed on non-cat losses," said Johal.

"We're seeing that in cyber and in the casualty space as well, where the non-cat modelling and how capital has been deployed against that is being assessed. There's discussions around some of the volatility that's going to come out as a result of casualty lines – that takes a bit longer to come out onto the books."

On cyber, Johal added that there is a clear demand from corporate clients for broader coverage, irrespective of the varied experience of carriers.

He pointed to CyberAcuView and Perils' US cyber industry loss index, launched earlier this month, as an example of where the industry has looked to close knowledge and data gaps to help assessment and underwriting of these risks.

"The consensus to understand the cyber market is important, and these indices and this type of experience will help it, but there is still a lot about the cyber market that's not understood," Johal added.

"This is going to be a growing and evolving market, but we need to recognise some of the challenges to really understanding and modelling the underlying risk.”

Improving data standards and new technologies

The key to unlocking this is centred around understanding and using data, particularly as talks during the Rendez-Vous highlighted that data in the (re)insurance industry is not currently at the standard it should be.

“There is a richness of data that needs to be used and there’s a standardisation of data that’s needed. We’re seeing that pretty much across every carrier and broker,” Johal told The Insurer TV.

“The ability to use analytics and AI to assess these portfolios becomes more topical as we discuss insurance as a portfolio optimisation play. We’re seeing more investment and focus around the use of data and innovation, not only for understanding risk, but understanding portfolios more broadly.”

Regarding the latter, the use of generative AI (GenAI) is attracting increasing conversation, as carriers and brokers look to invest in innovative technologies.

“It’s a board-level agenda item, and we’re seeing massive investments in that,” Johal affirmed. “What’s becoming more difficult is to ensure that you’re getting clear business value out of it – whether to improve your own processes, to analyse loss information, to provide better insights and pricing, or to provide more innovative products.”

He added that the legacy systems that historically operated across insurance companies, as well as the cost of ownership for such systems, have pushed more insurers to transition to cloud-based technologies, which facilitate data ingestion and analysis in real time.

“Anybody in the game of using a lot of data to make better decisions needs to embrace the data and technology angle. And insurance is exactly one of those industries.”

Johal concluded: “What’s also important to realise is that this is where ecosystems and partnerships are really important, because no single carrier, broker or entity is able to really harness the full value.

“At Deloitte, we’re working very closely with our clients, with (re)insurers and brokers, technology companies, GenAI specialists and data companies, to create solutions. And those solutions are becoming more prevalent in the insurance space.”

Watch the 13-minute video interview with Deloitte’s Guru Johal to hear more on: