Investing in underwriting technology

Kate Markham, CEO of Hiscox London Market, featured on the latest episode of the Voice of Insurance podcast.

In the final quarter of 2023, Hiscox London Market undertook a proof of concept with Google Cloud, to see how its lead underwriting could harness the power of artificial intelligence (AI) to drive improved results.

The AI exercise focused on sabotage and terrorism business – chosen for the class’s relative simplicity among the 18 classes of business underwritten by Hiscox London market.

The work focused on extracting information sent to the underwriters from brokers, typically for a renewal, looking at different schedules and coverages – what’s in and what’s out.

“We thought that gave us the platform to deliver something tangible in a short timeframe, having not done it before,” said Kate Markham, CEO of Hiscox London Market, speaking on the Voice of Insurance podcast.

While not a live system yet, the pilot’s results were impressive, most obviously in terms of saving time, she emphasised.

“We were able to take a process that typically takes three or more days, and reduce it to three minutes. So, a lot quicker to get from that initial email submission through to quote,” Markham said.

Work begins with the email submission, she explained.

“It’s saying what’s in the email, what information has been provided to me, what attachments are in there, unpacking that, and then being able to look at those schedules of values that come with the terrorism risk, to be able to plot those, manage the aggregations around them, do what we call the blast zone analysis, and then have a look at the contract,” she said.

“It’s taking this client’s set of risks or set of properties, plotting them on a map, and saying ‘Where are they? And how do they overlay on the clients that we’re already insuring’, and if there was to be a bomb, we look at how much damage we would be insuring within a 250 meter radius,” she added.

The result was faster, better decision-making, she explained, on key questions about whether a risk could be insured, and what a new risk would do to the existing portfolio, and how to price the risk effectively.

“We have built the pricing engine in the cloud, and that’s linked in via an API, all automated as well,” Markham said.

“The goal is to be able to do it whilst the broker is on the phone, and we think that’s achievable,” she said.

What Hiscox trialled in the fourth quarter began with the current reality of an email with attachments, rather than what the London market is already planning through its Blueprint Two digital transformation initiative at Lloyd’s.

Such conversations, with data cleansed from spreadsheets and word documents, can increasingly be banished to the past, she thinks, for those brokers that have regular interactions featuring the same kinds of data and documents, which can be digitised.

“That’s the way the market is going,” Markham said. “What we need for that to happen, is we need upfront – the broker piece, the client piece – to be coming in digitally. That’s where Blueprint Two comes in, where we talk about call data record, and that’s about having clean data coming in.”

The proof of concept trial is an example of pragmatism, she suggested, as it works with today’s imperfect world, rather than the post transformation outcomes envisaged through Blueprint Two.

“We’re not asking the broker to change what they do today, whilst we all work together to try and move the market forward in terms of modernisation, but yes, it will be better in the future,” Markham added.

Plans are now underway to make the pilot scheme live across classes of business, she revealed, starting with major property direct and facultative business.

More broadly, Hiscox has already been using an in-house model to cleanse schedules of values, taking time-consuming work away from underwriters.

“When we implemented that a couple of years ago, we found it paid for its own build costs within less than 12 months. Now, that is pure cost saving every single year on an ongoing basis,” Markham said.

It’s largely about saved labour, with the time saving allowing underwriters to add more value, Markham noted. “It’s about freeing the underwriters up to do the things that they’re actually trained to do,” she added.