Pacific Life Re | November 2024
This article was first published on Asia Insurance Review by Ahmad Zaki.
While much has been said about the transformative benefits of machine learning models in the insurance industry, less attention has been given to the challenges and complexities of implementation. Asia Insurance Review spoke to Pacific Life Re’s Mr Ong Qian Hao and FWD Group’s Ms Fiona Hermans to understand how strategic partnerships can effectively address these challenges and lead to successful outcomes.
Machine learning certainly is not a new technology. In fact, it was coined sometime in the middle of the 20th century by Alan Turing. It is only in recent years that organisations such as FWD, a pan-Asian life and health insurer with over 12m customers across 10 markets, can leverage the power of machine learning.
Pacific Life Re, a global life reinsurer with a presence in over 12 countries across four continents, has been at the forefront of innovation. In the last few years, it has leveraged machine learning and AI to gain deeper insights into both traditional and non-traditional risk factors, improve pricing strategies and help clients deploy their own predictive models.
The good news? Insurers do not have to embark on this alone. Teaming up with reinsurance partners - who bring broad industry insights and specialised technical expertise - can help speed up and ensure a successful implementation.
An opportunity to innovate: A case study examining underwriting
Most, if not all, insurers have achieved significant efficiencies using automated underwriting systems based on predefined rules and guidelines. Building on this solid foundation, the industry is now at the stage of integrating machine learning into underwriting. Machine learning models can help insurers assess risk more efficiently and yet, still effectively.
This has the potential to accelerate decision-making further, provide a better customer experience with more personalised solutions, and increase overall operational efficiency. This progression represents the next frontier in underwriting, positioning insurers to meet the demands of today’s dynamic market.
The data science team at FWD was keen to deploy machine learning models to support their growing business volumes further. Much work by FWD has gone into internally validating and testing of predictive models, which have been shown to accelerate and streamline existing processes.
FWD partnered with Pacific Life Re who served as an independent expert to assess and quantify the impact on financials and risk exposure of these machine learning models. The underwriting and data science teams from both companies collaborated closely to assess the predictive models, utilising a broad range of stress tests and scenario analyses.
The primary objective was to understand and quantify how these models could impact FWD’s financials and risk whilst ensuring the main objective of the models is met, to improve customer journey and outcomes.
Navigating the challenges of model implementation
Implementing innovative models in the market can pose several unique challenges, primarily because these solutions may be the first-of-its-kind and so lack any precedent, making the adoption a complex endeavour.
Specifically, what is often not discussed is the amount of organisational change required. Stakeholders may be hesitant to embrace unfamiliar technology without proven results or clear benefits.
Questions may include ‘how much faster and better’, ‘can machine learning really help with resource prioritisation and allow underwriters to focus on applications that genuinely need reviewing?’ and ‘what are the risk considerations for such implementations?’. Shifting strategic priorities and resource reallocation often compound this steep learning curve.
Machine learning: Dispelling the myths
Mr Ong said, “Machine learning models are often thought of as a black box. However, the field of explainable AI is growing rapidly and techniques like shapely additive explanations help shed light on how these models operate. Combining these techniques with a range of scenario testing allows stakeholders to understand the impact of deploying such models. This transparency not only builds trust but also enables cost and benefit assessments to be refined and informed decisions to be made.”
Drawing on its extensive market and risk knowledge from its global business, Pacific Life Re’s experienced underwriting professionals, together with its strategic analytics team, provided FWD with an independent and balanced assessment of potential risks associated with deploying predictive models. By combining data science expertise with deep underwriting insights, it utilised a comprehensive range of real-world scenarios - including anti-selection risk and potential model deterioration - to analyse the outputs from the machine learning models and quantify the financial implications.
Mr Ong said, “While machine learning offers remarkable capabilities, it is not infallible. The crucial factor is a deep understanding of the inherent risks, the development of robust mitigation strategies, and the clear communication of these insights to stakeholders. This proactive approach empowers our clients to harness the full potential of machine learning while effectively managing its limitations, ultimately enhancing their decision-making and competitive edge.”
Ms Hermans said, “It’s important to engage the right expertise and advisers to have a comprehensive understanding of the risks of our predictive models from a reinsurance perspective.”
Moving ahead together
As much as new technologies promise a great deal, and that the first movers who leverage it and build products around it will be well positioned to gain market share, the organisational requirements that govern it still present a challenge for many.
“Infrastructure takes time to build and mature, but of equal importance is making sure the right talent and mindset is cultivated for success to be sustainable over time,” said Ms Hermans.
“That’s when strategic partnerships and industry collaboration become truly invaluable in successful deployment of machine learning models,” said Mr Ong.
“By tapping into our global expertise in machine learning, data analytics and underwriting, we want to support our partners regardless of which stage they are at in their digital transformation. Whether it’s offering technical guidance, sharing insights on best practices, or helping to navigate potential risks, we are committed to working collaboratively with them to achieve shared objectives,” he said.
“FWD was born as a customer-led and digitally-enabled company and has been utilising AI, such as machine learning and predictive analytics, across our business since 2019. We recognise the potential for technology to improve customer experience significantly in areas like underwriting by reducing false alerts and questions as one example.”
Fiona Hermans
FWD Group Head of Customer
“While the industry often focuses on the benefits of machine learning, not much attention is given to addressing the technical hurdles and stakeholder management that come with implementing them. Rolling out a successful model usually demands teamwork across different departments and clear communication of technical results to the players.”
Ong Qian Hao
Global Head of Strategic Analytics | Pacific Life Re
Discover more Vital Insights
Protection
Changing regulations an area of opportunity for reinsurers
When asked what opportunities life reinsurers in Asia have, Pacific Life Re's Vasan Errakiah was quick to cite demand for insurance, changing regulations and the adoption of new technologies.
.png)
.png)
Protection
Solving the implementation puzzle of machine learning
Asia Insurance Review spoke to Pacific Life Re's Mr Ong Qian Hao and FWD Group's Ms Fiona Hermans to understand how strategic partnerships can effectively address these challenges and lead to successful outcomes.
Medical Advances
Update on COVID-19 and Long Covid
Read our update on the impact of mortality from COVID-19.
Medical Advances
Lung cancer screening, marginal gains or a game changer?
Lung cancer is often diagnosed at a late stage leading to poor prognosis for the individual. We look at how screening could have an impact.
Underwriting & Claims
From Barrier to Benefit: Rethinking the Future of Underwriting
Underwriting has been going through significant transformation over the last few years and continues to accelerate at an unprecedented pace. Traditionally seen as a barrier, there is now a growing opportunity to position underwriting as a strategic asset.
Protection
Leveraging big data insights in reinsurance
Big data analytics has been instrumental for (re)insurers aiming to boost performance, efficiency, and effectiveness.
Medical Advances
Vital Insights Issue 2
From emerging drugs which battle obesity to a review of the effectiveness of new blood tests both to detect cancer and to help slow down Alzheimer’s, we hope these insights help keep you up to date with the latest in medical research.
Medical Advances
Vaping vs. smoking: what are the risks?
Vaping is generally considered less harmful than smoking, however longer-term risks have not had time to emerge and could prove considerable.
Medical Advances
Gut Check: the concerning rise of bowel cancer among young adults
Despite broadly improving cancer mortality, some types of the disease are increasing in incidence
Protection
Serving the Underserved
Consumer Duty has put increased focus on how much value different customers get from financial products. But how well is the protection industry serving different customer groups? Who are the most underserved groups, and what can the industry do to help serve these groups better?
Underwriting & Claims
The future of underwriting is now... are we ready?
Underwriting processes, practices and philosophies are changing with faster pace than we have ever experienced before.
Medical Advances
Tackling the obesity crisis
A new generation of drugs has now well and truly arrived aiming to improve weight loss. The drugs are heavily touted by celebrities and influencers, despite many of them having no medical need to lose weight. Obesity contributes significantly to some of the most common causes of death including heart disease and cancer, as well as affecting quality of life for millions. In this article we look at these increasingly available drugs offering hope to more people with obesity. We consider their potential to broadly improve health, and their limitations.
Medical Advances
New drug may slow down multiple sclerosis
Scientists successfully conducted early-stage trials which provide hope of a future cure for some of the most severe types of multiple sclerosis (MS).
Medical Advances
Exploring the latest medical advances in cancer detection
The world’s largest conference dedicated to the science and treatment of cancer took place in Chicago in early June. The American Society of Clinical Oncology’s annual meeting is a popular forum at which new scientific developments are often revealed.
Medical Advances
Pituitary Neuroendocrine Tumour (PitNET)
A recent review by WHO resulted in reclassification of pituitary adenoma as described in the article
Medical Advances
Climate change and its impact on mortality and morbidity
In 2023 we’ve seen soaring temperatures across the globe along with devastating storms and wildfires. Why is our climate changing and what impact is it having?
Medical Advances
Vital Insights Issue 1
Welcome to our first edition of Vital Insights. Here we’ve put together a collection of articles covering some of the major issues of the day with a specific focus on how they will impact mortality and morbidity.
Medical Advances
Deep dive: Alzheimer's
Total deaths from dementias in high-income countries have almost quadrupled in the last 20 years, yet so far medical science has very few answers. This article looks at the recent emergence of the first drugs which may be able to modify the effects of this terrifying disease
Medical Advances
New Respiratory Syncytial Virus Vaccine
COVID-19 has stolen the limelight from other respiratory viruses in recent years. However there are plenty of other common viruses which can have serious health consequences, among them Respiratory Syncytial Virus, or RSV.
Medical Advances
An end in sight for AIDS
A new UN report reveals optimism about a possible end to the global AIDS epidemic
Medical Advances
Anti-vaccine sentiment increases risk of measles outbreaks
Vaccine technologies have continued to improve greatly in recent years. However, vaccines are little use if people refuse to use them. Here we look at the precarious position of measles, a well-known but little-understood serious condition, which is held in check in most countries only because of high vaccine uptake.
Medical Advances
Does a common sweetener cause cancer
The International Agency for Research on Cancer (IARC), the cancer research arm of the WHO, recently classified the common sweetener aspartame as a possible cause of cancer in humans.
Protection
Building a sustainable protection market
Beneath the Surface report 2023 We explored some of the key drivers of sustainability for the protection market. We undertook consumer research which combined with our medical and underwriting expertise and our deep understanding of the market, enabled us to create this report.
.png)
Protection
Navigating the ocean of Value-Added Services
Beneath the Surface report 2022 In this report, we analyse the current VAS landscape in the UK & Irish protection markets. Look to understand the views and experiences of customers, with the aim of assessing how much value these services are really adding today. Look at what insurers say, and consider what the future might hold for the development of VAS.