Computer says no .... Alex reviews this week's news
Computer says…no!
The Guardian this week reported on moves by a number of local councils in the UK to scrap the use of computer algorithms in helping to make decisions on benefit claims and other welfare issues. This was hot on the heels of widespread criticism of the use of an algorithm by the exam regulator Ofqual, which saw students’ A-level grades downgraded by almost 40% from the assessments of their teachers.
The ubiquitous nature of data in insurance and risk reflects the drive to embrace AI and algorithms and its potential to help create greater efficiency in the management and delivery of everything from underwriting and claims services through to fraud detection. While there is no indication - yet - or suggestion of algorithm issues within insurance, this greater scrutiny and calls for transparency in their use and operation points to the important ethical dimension around data and how it is used. There will, for example, be some assumptions built into algorithms used by insurers and MGAs and it would be wise, and in the public interest, to redouble efforts to ensure against any unconscious bias to safeguard consumer and business customers against being disadvantaged.
Racing through the ABCs
Following a couple of weeks’ lull in activity in the Atlantic, there was an expectation that we would see a significant increase in tropical storm and hurricane activity during late August and September. That certainly seemed the case with hurricane Laura, whose progress over the last few days was widely reported. The Insurer and Insurance Insider kept us up to speed on Laura’s progress and shared predictions about its potential strength and impact, comparing it first with Harvey in 2017 then Rita in 2005 as its intensity grew and point of landfall was identified.
At the time of writing, Laura had reduced intensity from a category 4 hurricane to a tropical storm as it makes its way through Louisiana. There were warnings from AM Best of the stress Laura might cause to insurers’ already weakened balance sheets and the likely impact of COVID-19 on the already inflated building costs that are a feature of post-hurricane reconstruction. As the winds subside, the potential impact on those balance sheets will become clearer (The Insider was reporting early estimates on an insured loss figure in the region of $US10bn).
But Laura is not alone. This season has seen a rapid start with nine named storms already formed in the Atlantic. In mid-August tropical storm Kyle was identified, making it the earliest date on record for the naming of a ‘K’ storm. According to Science News, in the average season - running June to November - there would be two named storms by this time of year. The latest predictions suggest that the final total could be twice and even three times that by the end of the season including up to 6 major hurricanes.
A spot of hiking
There have been a fair few conversations amongst the Full Circle team about the hardening market and the key role communication plays in building an understanding of the reasons for, and impacts of, significant rate rises and capacity challenges. So, the latest figures on commercial insurance rates in the US have emphasised not only the level of market hardening but also the continuing importance of clear communication across the insurance supply chain.
Business Insurance reported on the findings of the latest pricing survey from the Council of Insurance Agents & Brokers, with the average increase across all commercial lines in the second quarter of 2020 standing at close to 11% and the larger accounts seeing an average increase of over 14%. The highest average increase was 20% on umbrella liability business. The one area of slowdown was in D&O which saw a sharp decline in the rate of increase from over 32% in the first quarter to nearly 17% in the second quarter of the year.
In the UK, rates were the topic of an analysis in Insurance Post highlighting the impact of what they described as "eye-watering" hikes in rates for broker professional indemnity insurance. Against a backdrop of a lengthy period of too low rates and the potential impact of the Financial Conduct Authority’s business interruption court case, premiums are trebling and even quadrupling according to Post- leading some experts to warn of seismic changes to come for brokers.
With thanks this week to:
https://www.sciencenews.org/article/predictions-2020-atlantic-hurricane-storm-season-worse
https://www.postonline.co.uk/broker/7667851/analysis-broker-pi-rates-going-through-the-roof