Insurance portfolio (or book) management is critical to a carrier’s profitability. A review of the performance of top 50 commercial carriers over the past decade revealed a set of consistent winners that showed world-class loss ratios while achieving above-market growth rates, and created substantially more economic value than their peers through consistent profitable growth across market cycles. This indicates that the ability to manage a portfolio of business over time can be a source of competitive advantage.

In this blog series we are going to look at ways the portfolio management process can evolve to increase profitability.

A carrier that can respond quicker than its peers to emerging threats, or aggressively pursue profitable sectors of the market, will significantly improve its underwriting profitability. High performers create a competitive advantage by utilizing: 1) New analyses, 2) New data sources, and 3) New analytics and visualization tools.

New Analyses

With automation, predictive models, and complex operations and distribution structures, insurance today is more complex than before, and the portfolio management function needs to keep up. Carriers need to add these new analyses into their existing repertoire:

  • Flow analysis: How is business flowing through our process and what is the profitability by path?
  • Rule analysis: What is the profitability and efficiency of our rule structure?
  • Profile analysis: How are the risk profiles we have set up performing in terms of growth and profitability?
  • Underwriter/broker analysis: What is the level of effectiveness in pricing, closures, and profitability?

New Data

Enhance basic data with new external sources. This can include new demographic information on companies, individuals, or neighborhoods. This type of data can help the carrier not only better understand its current portfolio, but also look forward to possible actions in the future. For example:

  • Carrier A could explore the potential degradation of its portfolio by examining the locations of its retail risks to see whether pharmacy and supermarket trends are reducing shopping center occupancy levels.
  • Carrier B could examine the sentiments of renters in different areas to find out whether certain brokers or underwriters are writing apartments with greater risks than others.

New Analytics and Visualization Tools

Book management must be capable of continuous, exploratory assessments of the portfolio to identify areas of risk and advantage in a test-and-learn approach. Leading carriers will integrate the following advanced analytics tools and visualizations into their portfolio management function:

  • Use analytics engines to find micro-segment pockets of risk and potential.
  • With machine learning, identify hidden patterns of data or interaction for analysis.
  • Use data visualization to reveal unexpected risk concentrations for mitigation.
  • Manage the output of the portfolio with flow visualizations to understand how business is flowing through the operation and where that flow might need to be adjusted.
  • Use intelligent visualization for portfolio performance evaluations.

The best carriers will be able not only to better assess their portfolio’s performance with these new resources, but also to act appropriately.

Carriers utilization of new data new analytics and visualization

Join us next time, when we take a closer look at how and how rapidly to integrate these insights to the portfolio management process.

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Isn’t it time you managed your insurance portfolio better?

Effective portfolio management is critical to underwriting profitability. Learn about managing your insurance portfolio better.

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