Data – the buzzword of the decade. The world understands its value, but the insurance industry has not only lagged behind in exploiting data, it has also created huge inefficiencies in how it is handled and exchanged. At RMS, we believe that no single company is going to solve this problem – it will take collaboration.
The data that drives risk analytics has proven particularly tricky to handle and leverage. Right now, the only standards the industry uses are decades-old property cat schemas – venerable work horses that took the industry from an almost total lack of exposure data to a relatively high degree of understanding. They transformed how property cat risk is transacted, priced, and managed. But these old formats have run their course and if we want to gain meaningful efficiency, improve profitability, and pursue new opportunities beyond property cat, we need a new standard.
Fortunately, an intriguing possibility exists. Over the past few years, RMS has researched and built a comprehensive and flexible new data container called the Risk Data Object (RDO). This data specification can handle any type of model, any line of business, and any financial terms and conditions. It also contains a complete and auditable record of an analysis, eliminating the inefficiency caused by incomplete information in today’s standards. The RDO is also backward compatible with the existing RMS EDM (and could be compatible with any existing standard), so companies aren’t forced to immediately revise systems and processes – they can adopt as they see value in doing so.
Despite these benefits, however, it is foolish to expect the world to adopt a new standard overnight. Also, a standard shouldn’t be owned – and its development dictated, by a single company. This is the reason why RMS has decided to donate the RDO to the insurance industry. Beginning around January 2020, the RDO will be available via software development platform GitHub as an Open Standard. That means it can be used by anyone, with:
- No fees
- No royalties
Anyone will be able to use the RDO, use the format in their products and make suggestions about how it can be improved for all. The industry can collaborate to build a single, technically advanced container for exposure analytics – potentially consolidating everything we need to understand around exposure and loss for an analysis or transaction into one universally accepted container.
To collaboratively guide the development of the RDO Open Standard, a Steering Committee of industry leaders has been formed. At the moment, this group consists of 14 companies.
This highly knowledgeable team has two missions:
From now through to January 2020: Review and test the RDO to ensure that it is ready for its first release. Even though the RDO has existed for several years and is well tested, a round of objective expert scrutiny will ensure it starts life as a high value and easy to understand asset.
After January 2020: Prioritize the nature and scope of improvements. After public release, anyone can suggest changes and improvements. Should a new line of business be created? Does a company wish to add its model parameters to the standard? The possibilities are exciting, and the Steering Committee will work with the industry to decide how improvements are made and when.
Collaboration is the future! Our industry must stop re-building the wheel every time we create a new view of risk. If we continue to work in silos our expenses will climb, and potential creativity will be lost to the mundane and outdated ways we work today. Let’s move forward together.
Want to know more about the RDO Open Standard? Take look at our dedicated Risk Data Object site.