Digital Insurance Agenda

Enabling an Insurer to shift from good faith based underwriting to dynamic and data-based decision making

Written by Roger Peverelli and Reggy de Feniks - Founders The DIA Community on Jan 21, 2022

Virtual i Technologies aims to transform the way the insurance industry carries out risk assessment and underwriting. Their solution [VRS]™ Virtual Risk Space offers an innovative platform that allows underwriters to assess risks of different sizes and different complexities. Insurers can now avoid bad risks completely, enhance their monitoring of accumulation, gather FNOL evidence before it is destroyed and, ultimately, improve their Loss Ratio.

[VRS]™ Virtual Risk Space is an intelligent platform for insurance underwriting and risk engineering. It opens up space for data-driven risk assessment and brings a virtual, yet visible touch to the insurance industry, providing a simple solution to a complex problem with the use of technology.

[VRS]™ Virtual Risk Space enables fast and objective risk assessment by reducing the time spent on site and the time spent report writing. Clients even get risk improvement recommendations immediately after the inspection is finalized.

[VRS]™ provides not only an intelligent platform for risk assessment, but also high-quality risk engineering services. Virtual i Technologies transforms traditional risk engineering services into tech-based and data-driven processes that add instantaneous value to the insurance industry. They also have a global network of risk engineers that insurers can assign surveys to and thus gather data in real time. Their partner engineers in their global network offer complex risk engineering services for operational facilities in various industries such as manufacturing, heavy industries, utilities, mining, transport and logistics. Finally, their network of risk-engineers guide younger colleagues without the need to travel or be physically on site. This results in the reduction of costs and improved reliability of  inspection results.

Challenge accepted
A Use Case illustrates how Virtual i Technologies contributes to dynamic and data-based decision making for underwriters:

This particular challenge concerns a fertilizer production and storage facility in a major port located in East Africa. The underwriter’s concern was primarily related to the presence of the fertilizer compound ammonium nitrate, which is explosive under certain conditions. Ammonium nitrate has caused major incidents in the past, with the most recent being a large explosion at Beirut port in August 2019. Based upon that critical incident, the underwriter who had covered this particular facility for a long period of time became very concerned. Without a risk engineering function in its own company, the underwriter had developed a maximum foreseeable loss estimate calculation without a scientific basis; this calculation indicated that a wide area around the port would be destroyed. This meant a breach in the reinsurance limit.

It is difficult and expensive to mobilize a  Professional Risk Engineer to that location, so the Insurer came to Virtual i Technologies for a solution. They were able to connect a risk engineer who had relevant fertilizer industry experience with the Facility Operations Manager.

Using a 3-hour survey, he was able to determine that the company no longer stored or processed ammonium nitrate and had not actually handled that material at the facility for more than 10 years. The underwriters’ assumptions were thus based on old documentation supplied by the broker of the company. Ammonium nitrate was thus not present and other materials which were being handled in the process of that facility were much more stable fertilizers; they did not have an explosive potential, even under extreme conditions. 

The survey indicated through the [VRS]™ Virtual Risk Space scoring system that it was a good risk with 1.37 protection to exposure ratio; meaning that the exposures were relatively low. The maximum foreseeable loss assumption of the facility is dropped to approximately 15% of the non-scientific estimate. The underwriter was now allowed to continue to write business with the facility, and he also knew that they were not breaching reinsurance requirements.

The outcome was very positive for both the underwriter and the insured. The underwriter understood it was a good risk quality and very low loss exposure. The insured got some value out of the risk improvement recommendations, predominantly on testing of fire pumps and general housekeeping. 

In the end, the result meant that the underwriter could write significantly more business on the basis of a short survey that was conducted for approximately 30% of the price that would have been incurred by sending an engineer from one of the main insurance hubs in Africa to that particular location.

Curious about Virtual i technologies and [VRS]™ Virtual Risk Space? Check out their website for more information here.

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