The Influence of Technology on Underwriting Risk
“All businesses should seek to see technology as the opportunity it can be, but equally I would also say it’s only one part of the picture. I never subscribe to technology is going to completely change everything we do. I would always start with underwriting, but clearly, there’s probably some lower hanging fruit that we can all take advantage of by having better systems and processes behind us”, Alex Maloney, Group Chief Executive Officer, Lancashire Group.
We could not have said it any better ourselves.
As a commercial insurance software provider, we’ve always supported the notion that technology in insurance underwriting is about systems holistically supporting the decision making process along the entire value chain, from pre-bind to post-bind. It’s not about technology coming in and usurping people from their jobs, but enabling Insurers and Underwriters to underwrite risks more confidently, especially in today’s uncertain climate.
In this Voice of Insurance podcast, Mark Geoghegan speaks to Alex Maloney about the importance of preserving Lancashire’s DNA while moving along with the times, and about his views on artificial intelligence, Lloyd’s Blueprint Two, technology’s place within the industry and the one thing that impresses him the most about InsurTechs.
The importance of technology in underwriting
“I 100% believe that if you get the foundation of underwriting correct everything else is relatively easy,” Alex Maloney.
Throughout the interview, Mark emphasises several times the importance of getting underwriting right. We wholeheartedly agree. We have published blogs, reports, and articles about why profitable growth is tied to underwriting excellence; you may want to check out this blog we posted on how adopting an underwriting first approach supports underwriting profitability.
However, it’s Alex’s comments on artificial intelligence and automation that really captured our attention. Speaking about automation, Alex says, “I do believe there’s a lot of standard business or business that’s overcomplicated for no logical reason that can be automated.”
Rightly so. The current trend towards automation, artificial intelligence and robotic processing within operations with the aim of moving low-value and repetitive tasks is to liberate Underwriters to focus on those high-value tasks such as spotting new business opportunities and focusing on customer relationships.
However, is the industry moving fast enough to automate processes? What has been the impact of technology on underwriting?
In a survey we ran last year looking at industry attitudes around underwriting discipline, seventy percent of insurance and reinsurance executives said they were comfortable with the prospect of large volumes of simple underwriting tasks becoming automated in the future. In the same survey, the majority of respondents agreed that administrative functions such as account research should be automated with the view that automating such functions will enable Underwriters to focus on evaluating and pricing the risk.
Although the market is largely in favour of automating certain tasks, the survey showed there is still uncertainty around how much of the workload could be automated by technology. Half of the survey respondents said they were undecided on how which parts could be automated.
Despite large-scale digital transformation projects taking place across organisations, the survey suggests that perhaps the pace of automation of processes is still an opportunity waiting to happen.