Which is the way to go for commercial insurance?

The insurance industry has always been considered something of a chameleon. For instance, it has to constantly maintain a balance between the needs of its customers, and legal as well as technological change. The resultant tension often raises questions, as is the case with commercial insurance, for example.

Commercial insurance is complex, and thus does not usually rely on standard products. The private sector can cope with simple features such as living space or marital status, but the essence of business insurance requirements cannot be captured with a few basic pricing features. What counts here are individual solutions. Yet company business also generates particularly high demands for consultancy and support, and this is precisely where the balancing act begins.

Digitization vs. human resources

IT and EDP are the buzzwords of our time, and in the insurance sector, they enable things that were once unthinkable. It’s now possible to complete ratings and insurance applications electronically, and it is quite feasible to send an insurance certificate on the same day. All this can mean the customer may have the policy in hand within a matter of hours.

The classification of new risks is also made much easier. Whether it concerns terrorist attacks, cyberattacks or the growing market for D&O insurance, the insurance actuary of old must be very envious of what his present-day, electronic-equipped colleague can calculate in next to no time. Of course, any computer requires data to perform these functions, and ultimately, data is just a modern version of paper record sheets used in the past.

The industry welcomes this modern burden, especially those sectors that are subject to constant change and can now manage to stay right up to date. A good example here would be liability insurance, where just looking into a crystal ball will do no good in a situation that calls for complex electronic calculations.

No blessing is without a curse

Of course, the benefits go even further. Input via data masks makes many things easier, but this is also where problems begin to emerge. Ugly words such as “error rate” can be your downfall, because if a required field is not ticked, the machine will refuse to proceed further with a calculation. Likewise, when the customer just clicks to confirm he has understood his responsibilities and that he was advised of his (pre-contractual) disclosure obligations, and much more, processing becomes easier and faster.

The problem is that these solutions all demand some level of standardisation. A computer can only request items that its software program specifies. So, unlike a human, it is unable to react flexibly and thus can neither listen nor search for solutions. A machine can only run and execute particular programs, therefore the questions mentioned earlier, about living space and marital status, can all be handled with relative ease. However, technology is doomed to failure when confronted with complex and intricate matters such as insurance requirements in the business world. Room to manoeuvre? That’s hard to find these days.


The optimal solution can only be to merge the advantages of both approaches, which will require time, money and effort. In the end, the human element remains irreplaceable, so workers will still be required to roll up their sleeves.

This article was first published on LinkedIn.