What's Happening?

The exponential underwriter and the analytics imperative



Most of the papers, reports, and articles about the future of insurance underwriting are focused on commercial and corporate insurance, with very little attention to personal lines underwriting.

With the post-pandemic acceleration of digitisation, advanced analytics, and artificial intelligence across all industries, it is important to investigate what the personal lines underwriter of tomorrow would look like. How do we upskill our existing staff to remain relevant in an ever-increasing commoditised environment?

The role of artificial intelligence

Whereas the traditional underwriter role is focused on pricing adequacy, risk selection, and data capturing, and to a lesser degree portfolio management and cover design, we can agree that the future of underwriting is distinctly data-driven.

The latest technologies like artificial intelligence and machine learning can change the entire underwriting process with readily available customer data. This will assist in moving towards a more predictive risk management capability. We need forward-looking models of how exposures can, must and may change. For this we need predictive models and not only the historical data models we currently use. We need to underwrite with foresight and actively monitor portfolios, to ensure we understand our business and the risks we insure in real time. It is important to incorporate a blend of predictive and historical models into our risk selection and pricing to ensure that our businesses are future-fit and ready for the impacts of global warming, changing weather patterns, migration and increasing cyber risks, for example.

Technical pricing models, although the core competency for successful pricing, cannot be used in isolation. Although a critical input to ensure adequate pricing, technical cannot be the only pricing consideration when pricing personal lines risks, because softer factors like market conditions, client status, competition, and partnership strength, also influence the final price.

Tech and human initiative

Data-driven analytics is important for risk selection, but it must always be accompanied by human judgement and input. Distribution, with their market relationships, must use data-driven analytics to ensure underwriting performance and reduce leakage in the underwriting process.

Wordings need to remain relevant to the target market they serve, as well as considering emerging risks that clients face. However, it needs to be carefully considered to avoid cover creep without the correct pricing models in support. This is a complex debate, which requires careful consideration by bright and experienced minds. The ideal future would include artificial intelligence, which provides intelligent contracts and rules-based endorsements.

To enable all these advancements, it is imperative to ensure cloud-based, future-fit administration systems with modern architecture, which can enable real-time, on-demand execution. In the service economy of the twenty-first century, we require price transparency, faster turnaround times and lower costs, which must be passed on to clients.


Embracing automation

Underwriting transformation must be accelerated by automation of routine tasks through augmenting teams with emerging technologies like bots, artificial intelligence, and alternative data source integration. We need to move into the future of underwriting with intelligent automation, which can process tedious tasks throughout the value chain. This will empower and free up the underwriter from the administrative and data-capturing role that currently takes up about 80% of their time.

This raises the question of whether current underwriters will be replaced by AI and other emerging technologies. It is imperative for current underwriters, especially in commodity lines like domestic underwriting, to position themselves for the future.

No more capturing data and issuing policies within contracted turnaround times. The underwriter of the future will have to reinvent themselves to fulfil various roles. They are very likely to in future play a pivotal part in the development, implementation and refinement of advanced data and automation solutions. They will more than likely have to interpret and communicate automated decisions and those augmented by AI to intermediaries. Underwriters will have to be more focused on sales, relationships, strategy and data.

Keep relevant

Now the question remains: What must current underwriters do to remain relevant in the data- and analytics-driven future? And what must we as leaders do to enable this culture shift?

Various roles with fancy names have been identified and defined, with different focus areas. For the purpose of personal lines underwriting, I believe the most important step-change is to move from data processing to relationship management. As underwriters who work with intermediaries, no sophisticated artificial intelligence or machine will ever replace the relationship. Establishing and growing strong relationships will be a key underwriting role in the augmented future. This role can be mandated to negotiate terms to close sales, and to identify attractive client segments with suitable go-to-market strategies.

A call for collaboration

There will also be a role required to work closely with the data teams to ensure that the analytic and predictive models improve underwriting accuracy and enhance customer and intermediary experience. Whilst having to understand how these advanced underwriting models work, this role will also have to ensure that they are up to date with new and emerging data sources.

Some current underwriters may want to move into the technology environment, by providing the knowledge and skills required to build and enhance the predictive models and to adjust the assumptions to market conditions. All the relevant rules for automation or enhancement need to be intimately known, along with the core reasons for them.

Finally, there is the key role which must work with analytics and the distribution team to ensure continuous and real-time monitoring of the business environment. Whether it is a catastrophic event associated with climate change necessitating urgent underwriting intervention, or a market opportunity through partnerships, this role will act as business developer of the future.

As leaders, it is our responsibility to ensure that our teams are sensitised to the imminent changes and that we foster a culture of change to embrace and enable these important career changing opportunities. 

We must all adapt to the digital economy to ensure we remain relevant. This is also true for the personal lines underwriter of the future.