Insurance against the Apocalypse
The last 12 months have been an interesting year for insurers in Australia some would say almost apocalyptic (although don’t get too worried it’s not quite what Harold Camping predicted). We’ve had Victorian Bushfires (Losses $1.2B), Perth Hail storms (losses $1.2B), Cyclone Yasi (losses $2B), Queensland floods (losses 2.6B) and earthquakes in Christchurch, New Zealand (losses $8B). Each of these on its own would be classed as a one in a hundred year event, so together they’ve created a significant impact on insurers and reinsurers. It’s not just Australia either, with global cyclones and earthquakes hitting the reinsurance market hard.
It has certainly focused the attention of insurers on operational management and clearing the claims backlogs and put a number of IT projects on the back burner. So what’s in-store for the second half of the year? An old saying from the hotel industry is “don’t renovate during the summer season”. For insurers we hope that the disaster season is over for the moment and some renovation projects can begin, but for insurers who want to accelerate out of the curve where will the focus be?
The first focus is likely to be on pricing; with reinsurance premiums on the way up, effective risk based pricing will be required. At least with all the disasters around, consumers are more aware than ever about the need for insurance. It may be worth insurers investigating SAP’s HANA to speed up the analysis of loss experience and build predictive analytical models to improve risk exposure and profitability especially with R now proven to run on HANA. The profitability and cost management module for insurance will also allow insurers to understand where their existing costs are distributed in their current products and activities.
The other focus area is likely to be on improving the claims experience. The new release of SAP Claims Management includes a newly designed claims handler’s workplace for ease of use and with productivity tools like enterprise search and the integred BRF+ rules engine, the business case should be much easier to develop, especially with all those claims statistics from the first half of the year!
So don’t waste a crisis, let’s get some insurance projects ramping up through the second half of the year – in time for the next apocalypse.