Assessing the Potential Impact of Incidents Using Sophisticated Modeling Platforms in Insurance

Case Study

The insurance industry is ripe for disruption and new fintech start-ups are eager to challenge established players. Mango Solutions worked with an insurance company that was embarking on a major transformation programme. The insurance company relies on sophisticated modelling to help assess the cover it provides to clients, yet its legacy scenario-planning system wasn’t fit for purpose. Mango helped the firm to develop a user-friendly catastrophe-modelling system. This system has helped to boost analyst productivity and allowed the business to take a much more accurate view on potential risk.

Challenge

Major incidents – such as freak weather events – can have a major impact on how an insurance company deals with risks and sets premiums. Insurance firms undertake catastrophe modelling, creating sophisticated models to assess the potential impact of incidents – a key component of a successful insurance business. The creation of these models relies on data-science expertise and high-performance computing.

Until recently, the organisation didn’t have a user-friendly way of creating and testing these catastrophe models as part of its scenario planning. This planning allows the company to assess the validity of its models in different circumstances and to consider key factors, such as the potential risk and financial exposure. The firm wanted to completely rebuild its modelling platform, and as part of this process, make it easier for its analysts to add data from other sources to help improve the quality of scenario planning.

The insurance company aimed to create a new, user-friendly front-end system. After being quoted a large sum for the development by a vendor, one of the insurance company’s internal employees, who was an expert in RStudio Shiny – a package that makes it easier to build interactive web apps from the R programming language – developed his own front-end system. This prototype front-end system was created in just four days.

The senior management team was impressed with this system, but were keen to create a high-quality, production version of the application – and that’s where Mango Solutions stepped in to provide expert advice.

Solution

The insurance company wanted to create the production version of the front-end system by Christmas 2018. Mango allocated two specialists to the project and helped the firm meet a short development deadline, delivering the system to the business in less than 100 days.

The final solution has made it much easier for analysts to bring data into the system, so that complex catastrophe modelling can take place. The web-based front end of the new catastrophe-modelling system includes a graphical user interface, with pop-down menus, making it simpler for analysts to build models and test scenarios.

Whereas the legacy planning system was so complicated that only a handful of users could use the system, is new, user-friendly platform supports over 100 analysts – increasing and enabling the firm to work on many more scenarios than was possible before, providing the firm with a more accurate view on the potential risk it is taking on behalf of its clients.

The success of this project has prompted the company to call on Mango’s services again to look at other areas of its data and development environment – applying similar rigour to other projects in areas of modelling and scenario-planning across the insurance industry, and also ongoing support for a move to the cloud.

Benefits

The senior management team has been extremely pleased with the final result of the work on the new catastrophe-modelling system – both in terms of Mango’s ability to work to a tight deadline. Mango continues to work with the insurance company, refining the product to meet new business requirements. Current estimates suggest that the project has aided in boosting revenues relating to the sophisticated modelling systems at the firm, by up to four times.