There’s little argument that, thanks to modern technologies, the role of the underwriter is changing. With many of the relatively low-value transaction processing tasks now fully automated, underwriters are focusing their efforts on higher-value relationship-building and analytical work that moves way beyond typical risk profiling techniques such as pattern matching.
“Stronger rules and predictive modeling became so prevalent during the last five to 10 years (especially in personal and small commercial lines) that many began to ask if human underwriters would be replaced altogether,” notes Gail McGiffin, principal with Ernst & Young LLP, in a recent report.
Automation is but one of the advances providing benefits to the underwriting function. Consider cloud and SaaS-related services, which address core application requirements of insurance carriers, providing on-demand capabilities in straight-through processing that applies to underwriting, policy administration, claims, and more.
Accordingly, the underwriter’s role as a decision maker is also evolving, with some underwriters now being called data scientists due to their use of analytics to measure and manage risk. And most carriers are using high-level automated technologies that make it easier to evaluate and price risk. But these decision-making efforts need to be profitable. In other words, thanks to technology advancements, this mandate adds to greater expectations and more pressure applied to the underwriter’s role.
“Underwriters can add value at every phase and interaction in the account relationship by helping to facilitate sales, for instance, or strengthening existing relationships through creative servicing enhancements,” notes McGiffin.
Consider the investments that insurers are making to get to that end state: As noted in the Accenture report, “Insurance strategy: Evolving into a digital underwriter,” 90 percent of carriers are currently investing in their underwriting function or plan to do so over the next three years.
“The type of underwriting technology investment insurers make matters greatly,” says Doug Moore, VP and CTO at ISCS, the provider of SurePower Innovation, a cloud-based insurance processing platform. “For example, it’s important to have the right set of tools combined with sophisticated rules-based workflows that can facilitate instant sorting of new applications, renewals, and endorsements into those that can be handled automatically and those that require an underwriter’s touch. This scenario can enable actionable underwriting, in essence acting to optimize the underwriter’s efforts and reduce cycle time.”
Although not all underwriters will progress to the role of data scientist, the use of standards and Web services, along with a real-time, 360-degree view of the customer, fulfill the promise of a digital ecosystem, notes Moore. “An underwriter presented with a policy application, change or renewal should have the tools that enable him to know everything about the customer that is in the system: claims data, billing data, notes, documentation sent and received, other coverages held and all information for them,” says Moore. “He should also be privy to all the information that is pulled from third-party sources.”
By evolving into digital underwriters, carriers will be able to offer the agility, efficiency and customer-centricity that are the hallmarks of market leaders while delivering the profitable growth that shareholders demand, notes the Accenture report. “We have seen leaders in this area reduce direct labor costs by more than 30 percent, achieve 2-3 points of loss ratio improvement and drive significant profitable growth,” say the authors.