Lead Forensics


Smart Underwriting for the Analytics Generation

17.11.20 Harvey Quinn

2020, so far, has been a year of incredible global upheaval and uncertainty, but it has also been a year of enormous reimagining and redefinition both at a personal and business level.

From a business POV, many organisations that believed the only way to get business done was having staff work from an office or through face-to-face negotiation have successfully transitioned to full-time home working. Sadly, this has not been the case for all businesses, with many industries unable to adapt to the new normal.

The insurance industry has taken, surprisingly well, to home working with minimal disruption. Word on the street is that many insurers are not too keen to return to the office full-time soon. I suspect that once we are over the pandemic, a hybrid working model will emerge with many people dividing their time between the office and home working.

Before the pandemic, one particular role in the insurance industry was already experiencing its own kind of redefinition. The increasing automation and digitisation of the underwriting process has transformed the traditional underwriter’s role calling for a skill set adjustment. Read my colleague’s insightful blog on Digital Dexterity And The Underwriter.

However, automating low-low value tasks doesn’t appear to be happening fast enough.

A recent article by McKinsey states that “Even in large commercial lines today, anywhere from 30 to 40 percent of an underwriter’s time is spent on administrative tasks, such as rekeying data or manually executing analyses, suggesting at least some opportunity for digitization and automation.” There is still ample room to significantly bring that number down so underwriters can focus on high-value tasks that generate income and expand business.

While Underwriter’s undergo their own personal metamorphosis, the pandemic has accelerated digital transformation projects. However, the prevailing opinion expressed during the many virtual industry conferences over the past few months indicates that businesses are still not sufficiently investing to make a genuine and permanent change along the entire insurance value chain needed to thrive over the few years. Underwriting in the insurance industry needs to get more analytical.

Analytics-based underwriting

Predictive analytics in insurance underwriting is the new frontier. Risk is not static; it continually morphs. Cyber breaches today are very different from those that took place 5-10 years ago. Phishing scams and the cliched lone wolf hacker in a hoodie, which to some extent is true, have given way to ultra-organised criminal groups and even state-sanctioned hacking with nefarious intentions. These attacks, which are often led by teams of hackers with exceptional technical skills, can often go undetected for days and even weeks, causing potentially catastrophic financial loss and reputational damage. This is just one example of how risk mutates.

In today’s turbulent economic and political climate, not using data sources and the granular insights gleaned from various data channels in the entire underwriting process is inexcusable, and arguably, irresponsible.

We expect insurers to take appropriate action and reasonable steps to ensure that the nature and scope of a risk are fully understood. Integrating the wealth of data available into the underwriting decision-making process can seem like a daunting task, but it doesn’t have to be. Through data-driven insights and by analysing renewals, old and new submissions, and incoming data from different sources, Underwriters can effectively forecast and assess the marginal impact of new quotes on their portfolio, identify gaps, and how to close them. Analytics-driven insights have been shown to help Underwriters spot new and emerging markets and opportunities to cross-sell and engage with clients at an earlier stage.

The good news is that this is already happening. Another McKinsey report recently stated that “by 2030, significant technology investments will have paid off, and manual pricing and underwriting will cease to exist for most personal and small commercial products across life and P&C insurance. Insurers that invested in new tools will automate their pricing in simpler businesses—such as auto, personal liability, and home insurance—by more than 90 percent. In the coming years, insurers will acquire significantly better pricing capabilities through machine-learning models and analytics that use customer data (such as wearables for health products) to offer tailored prices or that use external data (such as competitor quotes from price-comparison websites) to optimize premiums.”

Analytic solutions for underwriting

Data-driven underwriting, combined with an underwriter’s intellectual property, is the dynamic duo that every insurer should be aiming to have. Underwriting analytics is not about replacing the tacit knowledge that Underwriters have, it’s about enhancing it.

Smart underwriting is about getting comfortable with multiple data sources and maximising data insights to unlock growth to become a trusted partner to clients. It’s about automating those low-value tasks that are still so prevalent in today’s underwriting process. Sensors, IoT, telematics, predictive analytics and machine learning are shedding new light on risk – so why wouldn’t you want to use this data to look forward rather than retrospectively, to serve customers better and grow your business?

In the next ten years, having the right analytical solutions for underwriting and taking a holistic transformative approach to digitisation that is not done in a piecemeal fashion will allow companies to outperform their competitors.

Our ‘Underwriting’ software has been created specifically in partnership with underwriters. Systemising an underwriter’s knowledge our platform liberates underwriters from low-value tasks and delivers analytics-driven insights throughout the decision-making process, all the while adhering to corporate governance and compliance standards.

‘Underwriting’ consolidates and provides all underwriting functions into a single platform, integrates into established core policy administration systems, and can leverage other existing investments. A digital foundation which provides rich functionality that will equip underwriters with the tools to address new business models and support their digital future.

Find out more on our ‘Underwriting’ platform.

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