Leveraging Analytics to Manage Risk More Effectively 

In today’s challenging insurance market, businesses are navigating rising rates across nearly all coverage lines due to increased claims volume and higher payouts.

Key policies—like property, directors and officers (D&O), cyber, auto liability, and umbrella insurance—are seeing rate hikes of 5% to 30%, depending on the industry and region.

This hard market environment means not only higher premiums but also more stringent underwriting. Insurers are becoming more selective about which risks they’ll cover, sometimes limiting available coverage. Unlike the soft market where coverage limits are easily accessible and rates are lower, businesses now face difficult decisions about which policies to purchase or scale back based on affordability.

Reducing or eliminating insurance can leave an organization vulnerable, yet substantial premium increases make full protection challenging for many. This is why it’s essential for businesses to thoroughly understand their exposures to make informed decisions when structuring their insurance program.

Harnessing Analytics to Enhance Insurance Decisions

Incorporating analytics can provide valuable insights for understanding exposures and determining the costs of managing them. Although the insurance industry has long relied on analytics to set premiums, these tools have evolved significantly. Today, they offer a more sophisticated approach to evaluating and addressing each policyholder’s unique risk profile.

To effectively manage overall risk costs, businesses should use analytics tools that assess multiple lines of coverage—such as D&O, cyber, property, and umbrella insurance—and use the data to recommend the best insurance structure for minimizing exposures. This approach enables brokers to proactively identify optimal coverage and pricing in a challenging marketplace.

Various analytical models are available to assess the impact of exposures. For example, HUB’s Stochastic Cost of Risk Evaluation (SCORE℠) tool goes beyond standard actuarial assessments, providing detailed insights into nearly every coverage area.

The HUB SCORE℠ tool analyzes risk in three key ways:

1. Identifies frequency and severity metrics for specific risks.
2. Simulates a wide range of loss scenarios, estimating the likelihood of those scenarios occurring within the policy year and potential financial impacts.
3. Compares different insurance financing options in the marketplace, highlighting which one provides the best value for the insured.

Consider a nonprofit client using HUB’s services that held $200 million in umbrella coverage. Facing a steep rate increase at renewal, an analytical review suggested that $115 million in limits could effectively cover the organization’s risk, resulting in more than $200,000 in premium savings.

By applying tools like SCORE℠, which provide a thorough evaluation of exposures and coverage options, businesses may find opportunities to reduce premium costs through targeted, data-informed adjustments.

To explore how a SCORE℠ analysis can help manage your organization’s risk costs, connect with HUB International’s complex risk advisors.