Digital Dexterity and the Underwriter

In this very moment, as my own changing face exhibits the indignity of supporting something I have never been accustomed to – a moustache – in support of The Movember Foundation, I have taken the mental step to embrace the Mo and focus on the benefits this small charitable act will contribute to the greater good of men’s health.

I´d like to think that in an abstract way, my journey in embracing a physical change (albeit a temporary one), is comparable to those in the industry of certain seniority who have the opportunity to similarly embrace the changing face of underwriting.

Most would agree there is market consensus that the role of the underwriter needs to significantly change to meet the new challenges and opportunities facing the sector. The insurance industry landscape was different ten years ago to how it is today. If history can be trusted, it will look markedly different in ten years time.

Digital Dexterity for the Digital Era

I know I´m stating the obvious here, but today, the industry is data-led, and regardless of your bias and own perspectives, we are witnessing the rise of analytics and algorithms in the decision making process. As Gartner (the global research and advisory firm) suggests, ‘Digital Dexterity’ (the ability and desire to exploit existing and emerging technologies for better business outcomes), must be the priority of organisations that wish to succeed in the digital era. This, of course, extends across the enterprise and is not just the obligation of underwriters.

Some in the market view the increase of analytics and other technologies as a threat to their role, which is understandable. Who loves a threat? However, I think as an industry we could do more to shine a light not only the opportunities technology (such as analytics, IoT and arguably blockchain) delivers to enhance efficiencies, but on the opportunities it provides for the role of the underwriter to evolve.

At the recent London Market Conference, where industry leaders present, one speaker said “we should embrace technology, it´s a great opportunity but it shouldn´t take away people’s ability to negotiate risk in person,” a sentiment I wholeheartedly agree with.

Perhaps no other role in the market understands the nuances of insurance better than the underwriter. What if the introduction of analytics and other technologies automates those low-value tasks and liberates underwriters to focus on portfolio management, account planning, product development and better risk assessment to deliver greater value to the customer and embrace new business models? Those high-value functions that today, are too frequently either completely ignored or very difficult to execute.

At the same conference, there was unanimity amongst speakers that the London Market has to be willing to change without losing its entrepreneurial underwriting experience. The topic of the underwriters’ role transformation was a key theme on the day, with one speaker posing the question on how to get underwriters (and brokers) to understand they need a degree of digital skills (dexterity) to operate in the future?

Read our recap here (Fortune Favours The Bold) on the conference if you want to find out more about the key themes covered at the event.

Experience and Technology: not mutually exclusive

Traditional underwriters are not only facing technology impacting and changing their role. The trend of further outsourced underwriting, the growing sophistication of MGAs and a steady rise of ILS capital are accelerating the changes.

The prolonged soft market conditions have driven organisations to laser-focus on underwriting discipline to cut expenses and increase underwriting profit. The market is facing a barrage of challenges, from excess capital, new digital entrants, new distribution challenges and overall fierce competitiveness pressure. Not to mention, the insurance market´s other big challenge – a serious talent gap as many senior insurance executives are expected to retire over the next few years.

Tech-savvy millennials entering the marketplace seek to work in industries that embrace technology, flexibility and change. Can we truly say that about the insurance market?

Today, underwriters use a myriad of systems with no integration. This leads to obvious operational inefficiencies, too much manual processing and data rekeying that can result in incorrect data. Many risk decisions are still based purely on potentially incorrect information, and on experience rather than holistic and accurate data.

The manual intensive and routine processes done by underwriters every day such as data entry and processing for quote and bind, combined with tools not built specifically for underwriting and inconsistent data significantly curb the chance for underwriters to rapidly respond to market opportunities. Much of the data and knowledge still sits in silos and is unavailable at the point of decision-making, with many insurers overly reliant on antiquated business processes and systems.

We are past the point of no return: the role of the underwriter is transforming, which calls for a skill set adjustment. Industry veteran, Stephen Catlin, succinctly put it when he recently said that survivors would be those who embraced change, not those with the attitude of “it’s not like it used to be”. An underwriter can still carry out their traditional role with the support of analytics and technology, but they now have the opportunity to develop their digital dexterity as an underwriter with skills in data scientist, customer advocate, innovator and salesperson to focus on more relationship building tasks.

Fortune favours the bold. Embrace the market consensus that technology will inevitably change underwriting as it stands today. We should all be champions of change and support underwriters retrain and systemise their knowledge so they can evolve and keep their place in the new digital era. As the old adage goes, a rolling stone gathers no moss.