Current technologies and their (poor) integration with legacy systems is a hindrance to pricing in specialty and commercial lines business, and actuaries and underwriters can likely work better together than they are today – this according to a new report from insurance pricing software provider, hyperexponential. 

The 2024 state of pricing report, entitled Mind the gap: Specialty and commercial pricing is far from future-ready, let alone future proof, further states that powerful artificial intelligence (AI) algorithms are becoming increasingly viable, but the hype has outpaced the reality of current pricing technologies and workflows. They add that poorly integrated systems, administrative workloads and constrained, partial insights were impacting the speed and accuracy of key pricing decisions.  

Notably, 39 per cent said their pricing models aren’t fit for purpose. Only 16 per cent said they aren’t worried or haven’t considered the issue – 84 per cent report feeling worried.  

Slow-moving workflows 

“That’s no wonder when, for most actuaries, it takes over a month to build or release an average new pricing model; 14 per cent take more than a year. Nearly half of actuaries report that making a complex parameter and algorithm change takes more than a month. This may reflect good due diligence, but it’s also indicative of slow-moving workflows and outdated platforms,” they write. 

“While other financial sectors continued to digitize successfully for the benefit of their customers, many pricing transformation efforts within insurance were stalling,” they add. “New technologies will only widen the gap between innovators and those who fail to adapt.” 

The survey of 245 underwriters and 105 pricing actuaries across the United States and the United Kingdom was conducted to identify how legacy technology and processes impact their day-to-day roles. Of those surveyed, 96 per cent say there is room for improvement in the technology they currently use with 91 per cent of insurers investing or planning to invest in AI and machine learning (ML).  

That said, they add that 86 per cent of underwriters spend more than two hours every day on manual data entry and 83 per cent of actuaries are worried they won’t have the right tech skills needed in the future.  

Clunky processes 

“Pricing is a key lever for profitability, yet sluggish model development and iterations, clunky processes and a lack of insight make for less efficient, accurate decisions,” the report states. The survey results further indicate that 47 per cent have bought pricing platforms but these haven’t delivered as promised. Similarly, 47 per cent say they are unable to price optimally because old and new technologies are not integrated and 45 per cent say new technology has been purchased for pricing but these have not been put to the best uses.  

“It’s clear that modern pricing platforms are the way forward, and most insurers are already investing. Yet the findings ahead reveal that many longstanding issues are still negatively impacting pricing decisions and workflows.”