Aptitude Software sponsored last week's Insurance ERM’s Data for Solvency II Event in London at which leading insurers - including AIG, Allianz, Aviva, Chubb, General Re amongst many others - came together to reflect on the lessons learned from Solvency II and to discuss opportunities to tap more value from their data.
Three key themes emerged:
- The need to enhance and systemise reporting capabilities
- An imperative to shift focus from (sheer) compliance to value creation
- A desire to become more data-driven
Solvency II and the value of data
Solvency II has been a real driver for insurers to think through how they source, compile and share data, but the event discussion kept coming back to the need for more automation, better audit-ability and improved controls. Achieving initial Solvency II compliance has wetted insurance executives' appetites to be more data-driven but more work is clearly necessary to put the systems and processes in place to unlock value from these investments.
Insurance actuaries have long been used to compiling and presenting data, but this is too often in the form of lengthy reports and qualified with pages and pages of commentary. For too long, insurers have operated in silos, with only the loosest connections between actuarial, underwriting and finance teams.
The ongoing challenges of regulated reported has helped insurance executives across departments realise the need to link people, reporting processes and technology.
Insurance leaders have used Solvency II to form foundational data governance frameworks and standards. Many have invested in data warehouses and put thought into the need to enhance and systemise reporting processes. The focus now for many insurance businesses is to use these foundations to gain new levels of reporting agility and data transparency.
Data management and governance in insurance
The need for improved data management processes was highlighted by several of the speakers who referenced the standard problems of risk committees not understanding the quality of underlying data and how much it has been compressed. Participants voiced the need to drill down from regulatory, financial and other reports to the underlying detail below. It seems leading insurers no longer have patience for reporting and data that only serves niche requirements.
Another speaker used the analogy of a geoscientist looking for oil to describe the challenges of finding adequate data in an insurance organization. According to the speaker, only 1 in 8 oil drills actually finds oil (improving to one in seven in a known oil field). Likewise, insurance companies struggle to source appropriate data and have confidence in it. The desire, naturally, is to get to a point where data is accessible and trusted.
Insurers want to gain value beyond compliance
Insurance companies realise that capital adequacy and meeting Solvency II annual and quarterly reporting is not enough. In the increasingly-competitive insurance industry, risk data must be tapped to aid decision making and drive profitable growth.
Much of the same data used for Solvency II, capital adequacy calculations and internal models could be used to address future regulatory reporting requirements (e.g. IFRS 4 part II) as well as to drive better strategic decision-making.
Raw, transaction-level policy and asset data can be captured and combined with actuarial/risk and other financial information to enable insurers to optimise investment decisions, decide whether to purchase reinsurance, find opportunities to improve capital management and to price products more profitably.
Strikingly, the bulk of the discussion at the event was less about Solvency II and more about transforming the insurance industry through a renewed focus on enterprise data management. The audience clearly voiced a strong desire to unlock value from their recent investments in technology and to transform their business by being truly data-driven.
Aptitude Software offers a range of solutions to help insurers increase reporting confidence, achieve regulatory reporting agility, improve financial operations efficiency and unlock insight from data.