Transparent & Objective Data – Descartes Underwriting
This week’s guests on The Voice of Insurance podcast are Tanguy Touffut, CEO and co-founder, and Violaine Raybaud, Head of business development at parametric specialist MGA Descartes Underwriting. Offering data-driven parametric insurance against climate risk. Tanguy and Violaine speak clearly and passionately about creating a new generation of parametric solutions that are fully transparent, customised to the client’s needs, and the prospects for the application of parametric solutions in a vast global market like commercial lines. Tanguy and Violaine also chat about how working with third-party data providers and data transparency are vital to building trust with customers.
Kicking off the discussion, Mark asks for the inspiration behind Descartes Underwriting and the company’s mission, Tanguy responds explaining how that the creation of Descartes was borne from frustration at some of the inefficiencies in the market, “We wanted to tackle two challenges; so the first one is climate change. So Descartes is willing to innovate in the face of climate change, it’s one of the key challenges for insurers and reinsurers in the next decades, and we think that, of course, the claim ratio will go up there are more and more floods, wildfires, cyclones across the world.”
Elaborating further on the company’s mission, Tanguy provides an example of how the corporate insurance market is not fit for purpose, and how it takes around 550 days to process a claim in the US. Tanguy mentions that transparency is also a big issue in the insurance space and amplified by the pandemic, Descartes wanted to improve these conditions.
Should we always think of you as a parametric insurer, asks Mark, Tanguy replies, “I think so, but for us, parametric is just a means, not an end, so we think that there is a good match between parametric and new technologies.” If we think about reducing claims cost, parametric is the best approach, but parametric is just a tool.
Are you in the business of wanting to source proprietary data, or should we see you more as a platform business that is going to be there to ingest multiple sources of data from third parties, asks Mark, Violaine replies, “We do use a lot of data, we use on average one million times more data than a traditional player to insure the same risk. We do that through all sorts of data, satellite data, radar data, on-site data, official data from third-party agencies. The key element and one of the key features of our products are that they should be transparent and objective. So it’s really key that the data source has to be a third-party data source; it’s key to building the trust that´s paramount in corporate insurance and to ensuring brokers and corporate clients that there is no conflict of interest. If we were the ones sourcing the data and the ones using the data to pay a claim, of course, there will be a massive conflict of interest.”
Violaine adds that finding the right data partners operating the best radars and satellites to provide the best cover is essential, “Data is always shared in a transparent and objective manner, and that´s really at the foundation of the products we offer.”
Providing parametric insurance against climate risk, Mark asks if Descartes will look into non-peril lines; Tanguy says, “It’s true that today’s priority is really to innovate in the weather space, so many natural catastrophes, but as we say the rationale behind Descartes is to leverage new data sources, new algorithms, so as long as we have enough confidence in the data and the models, we´re happy to launch something new and provide some capacity.”
Speaking about the advances made in parametric technology, Tanguy says, “Compared to ten years ago, the ability to be more precise than human beings both for underwriting and for I would say claim handling through algorithms is becoming obvious.” Expanding on this point, Tanguy explains how, through satellite technology, data points can be gathered with a granularity of ten metres in a wildfire situation. Through AI and using newer networks to identify roads, rivers, forests, determining if a tree is burnt or not is now possible – the opportunities are virtually limitless for the future of parametric technology.