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!