ResQ to the Rescue
To the degree that such a thing is possible, insurers and their risk management partners seek factual predictability. That most relevantly applies to losses and the reserves set aside to cover those losses.
The hard truth is that the world, and the business world, are never predictable. Never has that been truer than in the wake of the COVID-19 pandemic that has rocked the world and broad swaths of the global economy.
Thus, the science of actuarial analysis, which would conversely be described as the art of determining adequate reserves, is going through its own forced, rapid evolution.
Under-reserve and you run the risk of insolvency. Over-reserve and you fail to deploy capital to its most productive use.
Where insurers, brokers and insureds in the past might have been satisfied with an annual or bi-annual analysis, that is no longer the case. With so much economic disruption, the trend is toward more frequent, even monthly, loss reserve assessments.
The wrench in the works is that legacy systems or approaches are just not that nimble.
“You can’t do a monthly analysis if your analysis takes a quarter to conduct,” said Jamie Mackay, a Director at Willis Towers Watson and leader of the Americas reserving practice.
“It requires a shift in work ideology,” Mackay said.
Not only does it require a shift in work ideology, but it also requires a shift in work methodology, Mackay said.
“The other big shift is moving away from open platforms like Excel, which has become an ongoing thing over the last few years, but which accelerated during the pandemic,” Mackay said.
Broader Insurance Trends
There are other forces at play, though, and not all of them are COVID-related.
According to Christina Gwilliam, Willis Towers Watson’s global reserving leader, there are four broad trends in insurance that are pushing a demand for better analytical processes.
The first is analytical decision making. That’s the drive for high quality, relevant data to inform good business decision making.
The second is agility. In this context that means making informed decisions quickly and being able to implement them in a well governed way.
The need for efficient and effective processes is the third focus, and the fourth is digitalization. Digitalization applies to product relevance and the delivery of products via simple and accessible digital transactions.
Even before COVID and so much rapid change, insurers struggled with legacy systems that were not easy to adapt to changing conditions. Those changing conditions include mergers and acquisitions that melded actuarial infrastructure from two different organizations. Not always did those marriages turn out well.
Add to that the fact that analytics teams that traditionally supported one business function, (say, pricing, underwriting, and reserving,) are now being asked to coalesce into integrated units that are asked to execute on strategies more efficiently.
“Therefore, analytics teams are going to be driving business decisions, rather than advising,” Gwilliam said.
“This change is happening now in specific markets with leading insurers,” she added.
“It will take longer to happen in other markets where there is less perceived value or more cautious insurers,” Gwilliam said.
With so much change in the economy and the markets, and so much pressure to evolve analytical processes or risk falling behind, what’s the answer?
Willis Towers Watson has the answer and here’s what it looks like.
ResQ to the Rescue
ResQ is a software platform that is designed to provide analytics to support reserving, pricing, and managing portfolios. With so much rapid change occurring and with an actuary’s time being so valuable, think of it as an actuary’s best friend.
According to Willis Towers Watson’s Jamie Mackay, ResQ can be a standalone workspace, or it can sit at the heart of a wider data and analytical framework.
It is also designed to enhance the capabilities of a range of insurers, from the smaller players to the very large ones. And how clients use ResQ can vary significantly, Mackay said.
“We have some reinsurers that are really focused just on applying benchmarks and basic approaches through to more involved analysis that take advantage of the range of diagnostics and graphs on offer,” Mackay said.
Gwilliam said the fact that Willis Towers Watson has deep insurance experience sets this product apart from products that are developed by non-insurance specialists.
“What makes us a better partner than a typical technology-only company that has to guess and fill in the blanks from an insurance perspective is the fact that we use our tools to deliver on our consulting engagements, and therefore, we understand the business of insurance, as well as how to best deploy the technology,” Gwilliam said.
The demand for a product like ResQ goes back to how much change has occurred in the past 18 months. Insurance policies that were written pre-COVID may not come even close to covering risks that have since emerged.
“The policies written at the start or before the pandemic were written in a completely different environment than those written during the pandemic. Being able to quickly spot where – and how – things are changing, communicating how we are managing that change, and describing the additional uncertainty in our reserves estimates is critical,” Mackay said.
“How do we cost policies or know how much money we’ll need to play claims if we don’t have a sense of how policyholder behavior has changed?” he added.
This added pressure on actuaries is exactly what ResQ is designed to address.
“The pandemic has really spotlighted the need for the insights and the experience that reserving actuaries have built up over the years, but also the need for tools to support that analysis and allow the insights to be delivered more quickly, more often and with more confidence,” he added.
Rather than being a static solution, Gwilliam said ResQ will continue to evolve as insurer’s needs evolve.
“We continue to invest in ResQ’s functionalities, based on continuous feedback from our expansive client base spanning over 70 countries. By partnering with clients, we want to ensure that we develop solutions to meet clients’ evolving needs,” Gwilliam said.
Whether it’s the challenges presented by COVID-19, inflation, or other forces, ResQ comes to the rescue to ensure reserve estimate are not only accurate and timely, but also identify insights to drive the decision-making process.
For more information on ResQ’s capabilities and how it can help address the requirements of IFRS17, e-mail Christina Gwilliam at [email protected].
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Willis Towers Watson. The editorial staff of Risk & Insurance had no role in its preparation.