Gallagher Bassett We Guide. We Guard. We Go Beyond.

The poet John Donne wrote back in 1611, “[the] new Philosophy calls all in doubt.” He might well have been talking about property and casualty underwriting in 2023. How many of our long-treasured data heaps now seem quaint, if not misleading, after the wrenching events* of the last three years and the ongoing leaps in tech and data collection? When it comes to quantifying and predicting risk, it may be time to rethink how we think.

An interview last month with Henry Kowal of Allstate’s Arity unit** offers useful insights into how data collection and underwriting are changing in one relatively straightforward type of insurance—personal auto. This is not a variety of coverage we often think about in corporate risk management. Still, Kowal’s discussion of how risk assessment is changing in this one area illuminates how underwriting is being challenged and changing in so many other LOCs.

Consider this one factor—telematics. Devices monitoring driver braking and acceleration patterns have been around for more than a decade now, and those parameters have been worked into the rating.*** But the world of telematics is expanding, and now we can get a report on cell phone use while driving—an even better predictor of potential trouble than braking and accelerating.

But that’s not the whole story. Arity now has a partnership with the makers of cell phone apps that track your driving all the time (45 million of them) and can deliver a report to the underwriter whenever required. No one has to wait while you plug the little box into your car and then gather data for a few months to generate a driving practices profile to adjust your annual premiums. Your rate can be based partly on how you’re driving this morning.

The first trackers you plugged into your car’s dashboard seemed high-tech a few years ago. The data sources we have now dwarf those early machines. Read the interview to get an idea of how much the green eyeshade folks know about what you do in your car right now. You might just blush.

Our point is that the same data tsunami is already here or rapidly developing for the business events we worry about every day, like commercial truck and auto insurance, which opens up major opportunities. We all know to fund claim certainties and save the cost of insurance for the real uncertainties, the less knowable risks. But if we are aggressively using telematics and other new data sources, more and more risks become certainties, as Henry Kowal demonstrates. This, in turn, can reduce the amount of risk we have to insure as the pool of unknowable possible events dwindles. That’s why this interview is a good one to read and think about. How might the ideas apply in your world?

Of course, we will never banish risk, but every day presents us with more opportunities to refine it to the real core unknowns and optimize risk costs by self-funding the knowable exposures. Yes, it can be like glacier watching, but glaciers do move. In fact, nowadays, some are getting downright slippery.****

*The pandemic, supply chains breaking, war and threats of war, political turmoil, disruptive new technologies, weather catastrophes—stuff like that.

**See An Interview with Henry Kowal | Insurance Thought Leadership.

***Saved your faithful correspondent a ton on car insurance. Not so much on covering the motorcycle, alas.

****Having a TPA with superior loss analytics is one way of shrinking your pool of residual unknowns. Analytics are not decorative; they’re solid gold.