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Our second thinktank of senior underwriting and risk engineering professionals took place recently. Co-hosted by Risk Solved and Tensorflight it covered subjects raised at the previous forum in the spring.

Top of mind topical issues

Resourcing continues to be an issue. Retaining existing staff and attracting new employees against a backdrop of increasing, inflation driven salary demands has compounded the challenge. A holistic benefits package and working environment approach is required, along with casting the net wider to graduates and those with transferable skills outside of insurance. Outsourcing is another option. However, there are concerns that this can be expensive, and the price is not always reflected in the quality of reporting.

AI is becoming an increasingly powerful tool. The recent RAAC concrete ‘crisis’ that led to many schools being closed was discussed. AXA used AI to review 70,000 client PDF records to identify 65 potential risks in two hours. A manual check would have taken over a year.

AI-Powered Precision: Using AI to decode complex property data

Tensorflight covered the current state of AI in risk assessment and engineering. This included the evolution of AI inputs in risk models, with a focus on diverse technologies, such as convolutional neural networks, and AI-powered tools like ChatGPT.

Risk Engineers are interested in understanding how AI could replace a physical visit and the tools used to assess a risk. AI aggregates over 30 data points including tax records, building permits, NASDAQ, Geocoding, flood data records from satellites and drones and open-source records. Other factors such as the geolocation and matches against local legislation are also included.

There is a desire for AI to ‘work for risk engineers’ particularly as a resource support and as an underinsurance tool. It is not yet there in helping with both challenges. AI can provide assistance in assessing 80% of the main hazards with the other 20% requiring a human focus.

Some of the members have gone live and have found AI to be powerful when assessing and analysing low hazard risks. For some members the next stage is to assess existing reports and predict events such as natural catastrophes. Post event AI information is already available using satellites and drones to ratify and settle claims efficiently.

A vast resource of information is held by brokers. Unlocking this would be a huge benefit in the development of AI. However, within this data mine what delegates really want is an executive summary providing actionable insights.

AI is not replacing expertise but removing the ‘leg work’ so there is not a fear of AI nor are risk engineers threatened by its growth. Risk engineering is still early in the AI journey. It is a powerful tool to with labour intensive tasks freeing up under resourced teams. This will be a powerful argument going forward as internal budgets have to date been a limiting factor in development.

Underinsurance – the perfect storm

Underinsurance has been a challenge for decades. A perfect storm of inflation, rising construction costs and inaccurate valuations has compounded the problem. An Aviva report estimated that 50% of UK businesses are underinsured, 45% have not checked their values post pandemic in the last 3 years and 21% are reducing their cover.

Underwriters have not been getting the correct premium on the rate that is being carried and this is unsustainable. It puts brokers in a tough position with a hard message to share with clients, many of whom have not had a valuation for over 3 years. Index linking is not bridging the reinstatement gap as building costs have jumped at a rate of 30%+ over the last 5 years.

Other rebuilding challenges include:

• Typical 12 indemnity periods, when planning could take far longer.
• Green enhancements also need to be factored in – from both the client and regulatory perspectives.

A hardening market has widened the underinsurance gap. However, one factor that could drive change is private capital. Financiers want evidence that 100% insurance is in place for the firms they invest in. There is sympathy for clients and collaboration and education is necessary. In the event of a claim, it is in everyone’s interests that a swift and fair settlement is reached quickly.

ESG, Risk Engineering and Sustainable Buildings

A growing number of developers want to build more sustainably, both by using sustainable materials like engineered timber, and by adopting modern methods of construction.

Aviva has launched a pilot with existing commercial customers who are pushing for sustainable solutions. The proposition is underpinned by underwriting conditions similar to a Lloyd’s policy. As timber is central to the builds, twice yearly visits are in place as well as strict fire controls including sprinklers and passive controls.

While this has been launched as a standalone project there is an opportunity to broaden it with other carriers. For example, other covers such as CAR could be integrated to provide a joined-up solution for the industry and clients.

Education is important, including engaging with stakeholders. For example, architects may not consider insurability at the outset of a project. Also, insulation, asset cost and sustainability factors need to be considered if a holistic risk picture is to be created.

Sustainability and net zero are becoming increasing drivers with huge political and societal pressure being brought to bear. For this pilot and the development of sustainable buildings to be successful there will need to be close collaboration between insurers, clients and construction companies.

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