Spreadsheet dependancy and pricing

Spreadsheets are frequently used for pricing

The widespread use of spreadsheets for pricing insurance has contributed to a business environment that is heavily dependent on spreadsheet results without due consideration for the need to connect these models to core operating systems. The reason for this adoption is that the user experience is simple and visual, and spreadsheet skills can be can be easily acquired. This has lead to significant adoption, making spreadsheets the most used tool for underwriters, actuaries and analysts in insurance. For MGAs, this can become a particular challenge as pricing volumes grow and underwriting processes need to remain controlled and scalable.Spreadsheets allow for complex calculations to be built quickly in a flexible coding environment while simultaneously ensuring common calculations can be done repeatedly, although this is often at lower volume than a standard system.

Surveys like the one performed by Milliman on actuaries in 2018 (see graph) highlighted the importance of spreadsheets to insurers – over 91% considered spreadsheets to have critical or medium importance to their work.

Source: Milliman UK survey, “Insurers, spreadsheets and Model Risk”, 2018