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19 May 14 07:31

We've recently conducted a reserving benchmark study on the Belgian market. We asked our clients to set reserves for two claims scenarios involving severe bodily injuries. The vast majority of Belgian Non-Life insurance companies decided to participate in our study, representing more than 95% of the Motor Third Party Liability market premium. I strongly believe in the added value Swiss Re can bring to its clients through such initiatives; sharing our unique market view on such relevant topics is what defines Swiss Re as a knowledge company.

In my view, the outcome of this study was quite striking. The variation in the reserve levels of the two scenarios was staggering, the minimum estimation being roughly half of the highest estimate in both cases. Admittedly, the two cases were hypothetical claim scenarios, not offering the same level of information as a real case with medical reports, court decisions, etc., but the substantial variation is noteworthy nonetheless. The result is even more important, when considering the fact that in Belgium there is an indicative table in place that serves as an aid in the assessment and calculation of  bodily injury claims and that is widely used by courts.

Is there a way to improve the current situation of different methods of reserve calculation? What if there was a standardized claims data format?

Advantages of such a unified data format would be manifold. More standardized claims data would mean faster and easier transmission of data amongst different market players like fellow insurance companies, brokers or reinsurers in case of co-insurance, change of responsibility in case of court decision or alike. A widespread data standard should increase administrative efficiency and therefore lower costs. A uniform claims format would possibly lead to more similar reserve levels for bodily injury claims and to faster reaction times in case of external shocks like indicative table changes as the analysis of the data would be much quicker.

Why is it that such a system is not in place yet? What are the obstacles blocking a standardized claims data format? Are there any markets where this is already in place? I would like to hear your thoughts on this!


Category: Other

Location: Belgium


3 Comments

Andrea Scascighini - 20 May 2014, 11:51 a.m.

Totally spot on Jerome. Standardized data formats exists in many industries and reinsurance seems to lack behind, at least on the underwriting side. The benefits of such a data standardization would be visible on all levels, starting from underwriting (better pricing, less uncertainty loading), but also for reserving (and thus supporting more precise valuations of reinsurers, investors would love this) to claim settlements (with a broader and more comparable set of of precedents for the claim adjusters to rely upon). As an industry we should clearly tackle this topic !

Sharanjit Paddam - 21 May 2014, 3:37 a.m.

As an actuary, I'd very much welcome a standardised format for claims data. There would be tremendous efficiency gains. Developing such standards would be a significant challenge. Different classes of business would have different requirements, particularly if you compare property and casualty business. Standards might also need to vary between different jurisdictions - particularly for statutory business that had legislated reporting requirements. Hopefully any such endeavour would be based on open source standards so that they could be adopted as widely as possible. Lastly, legacy claims systems, still in use today by many insurers would limit the extent to which companies could rapidly move towards a common standard.

Jérôme Ungricht - 25 May 2014, 6:26 p.m.

Thanks for your comment, Sharanjit. As an underwriter, I share your passion for data.

I fully agree with your point on the difficulty to establish a data format that is not only valid for one line of business but also for different countries with different characteristics, be it legal or any other. A standardized data format should always be based on the lowest common denominator and build on this. In the meantime, I found two interesting articles, addressing the same problematic: http://analysis.telematicsupdate.com/insurance-telematics/insurance-telematics-and-data-standards and http://www.infotehna.com/blog/items/corporate-wide-data-standardization-as-future-insurance.

Switching from one IT system to another always poses a huge operational risk. Although I agree that a rapid shift of claims system is very difficult, imagine the benefits of a standardized claims format for further mergers, acquisitions or any other changes that bring a transition to an other IT platform with them.

And yes, even though I am a hug fan of Apple products, I am all for open source ;)


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