A Day in the Life of a Future Underwriter – Reality or Fantasy?
As insurers increasingly incorporate algorithmic underwriting in the underwriting process, how will the Underwriter’s role evolve in the digital age?
We recently screened a short film in central London based on a short story written by Mark Geoghegan, editor of The Voice of Insurance, which follows an Underwriter on a typical working day in the (near) future. After the screening, Mark Geoghegan was joined on stage by James Slaughter, CUO of Apollo Syndicate Management, to discuss the future of underwriting in front of an audience of industry players.
Kicking off the discussion, Mark asked James how much of the video was pure fantasy and how much potential reality. Answering Mark´s question, James comments that there are some key areas that he likes and that resonate with him, “I think some really strong themes, particularly around how data can transform our decision making… what I really liked was the concept that the data is driving him to make his decisions faster, which I think is one of the things our industry could really strive for in terms of customer service or in this case broker services, but equally he (the actor playing the Underwriter) was able to make decisions in the context of very clear data.”
However, James had some reservations about how the role of the CUO was played out in the video, with James saying that in his world, the CUO would never get involved in day-to-day decision-making as shown in the short film.
Commenting on this, James remarks, “In a world in which you can create those sorts of digital decision nodes if you like, you could also create digital control and digital governance that empowers you with a strong ring of steel around it.
So in my world, I would have expected Harvey* to be able to make all of those decisions himself.” Speaking further about the CUO role, James mentions that there is perhaps too much hierarchy around decision-making in the Lloyd’s market, which can reduce the opportunity for talent to make the decisions they are trained for.
James goes on to talk about the types of decisions he would like to have seen in the film and that the video raises more questions than answers on the CUO role.
So, how far off is the industry in seeing a working day like the one played out in the future, asks Mark; James replies, “I actually don’t think it’s that futuristic…and in small parts, some of this is taking place today.”
James explains how in personal lines and small commercial, there is already low touch, limited data extract auto quoting taking place because the data is relatively straightforward and risk is relatively homogeneous. However, as for Lloyd’s, James notes, “When we get to our market at Lloyd’s, you kind of hit two things – one is a cultural barrier ´Oh, I do bespoke risk,´ yeah I know you do, but you do the same bespoke risk that that guy does over there, and that´s a mentality challenge.
I’ve seen it many times, Underwriters telling me that they do special stuff, and I’m like, it’s like the special stuff what I want you to stop. That would help, and we would be more consistent. The other thing that we see is that in an intermediated market like ours, technology comes with brand and therefore competitive value, so it’s much harder for us to get towards consensus opinion around data.”
But in terms of how far away this is, James comments that he’s seen bench tests and many tools implied in this video working today.
Algorithmic and data ingestion tools are increasingly becoming part of the underwriting process. What sort of percentage might be automated safely, asks Mark. James declares to having a bit of an issue with algorithmic in the London Market because there is a true concentration of expertise in London across all of the insurance value chain that does make a difference in decision making and does enhance the client product.
“So in answer to how much will be algo(rithmic) only, I think the answer is zero,” answers James. “How much can be driven by technology and data in the day-to-day process, if you like, the life cycle of a product all the way through to the claims? I actually think it can be quite large, and I think that´s around thinking about governance structures, I think it´s about data ingestion, I think it´s about risk metrics. But when it comes to actually making a decision, I think ultimately I´d expect to see a large proportion of human interaction and intervention.”
Elaborating further on algorithmic underwriting, James comments, “The other thing is, and this is the important point, is what does it allow Harvey to do that perhaps Harvey isn´t doing, and that´s the exciting bit for me.” James discusses how algorithmic underwriting can empower Underwriters to be more externally and client-focused, particularly with the younger generation coming through who are more customer and digitally focused. James explains how today´s market needs to focus on engaging better with clients and to move our heads up from the spreadsheet and talk to clients.
Summing up the discussion, the future Underwriter is someone who is:
- Empowered to make data-driven decisions
- Focused on their customer to solve problems and provide enhanced risk solutions
- Curious to learn and grow their skill set
- Makes decisions supported by tools, data, and teams across the end-to-end underwriting process
*Harvey is the name of the actor who played the role of the Underwriter