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Transforming the underwriting process to unlock innovation in P&C insurance

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Greg Murphy, Executive Vice President, North America at INSTANDA explores how innovating the static underwriting process could become a catalyst for immense transformation and growth in P&C insurance.  

Insurance is ripe for disruption, as advances in technology have allowed insurers to predict, adapt, and pivot to emerging needs like never before. Yet, one aspect that is still largely untouched by modernization is underwriting. What’s currently holding insurers back from digitally transforming this crucial process? How can insurers expedite change? And what does a bold new world of innovation in underwriting look like?

A stagnant process

In P&C insurance, commercial underwriting continues to lack the speed and data-driven analytics needed in a fast-paced, competitive environment. Today, underwriters still rely on manual processes and web searching to correlate risk information. There are many problems with this approach. The data that manual risk assessments are based on is thought to be accurate, but often it is not. Google searches to source underwriting data are labor intensive and have human errors. This means underwriters have less time to thoroughly interrogate data to assess real risk. If they take the time, it comes at the expense of selling less premium. Time is of the essence; customers no longer have the patience to fill in endless forms or wait days and weeks for a quote. 

Amid tight deadlines and pressure, the race is on for underwriters to build accurate risk profiles. Cutting corners to get quotes out quickly or relying on previous knowledge of similar risks without double checking data can lead to costly losses. 

When it comes to innovation in underwriting, it’s clear there’s an urgent need to simplify risk analysis and data gathering, to ensure underwriters achieve speed, but also to appropriately assess risk. The remedy for this need is data and automation. 

A new lease of life for underwriting

recent article from Deloitte introduced the idea of ‘the exponential underwriter.’ This new role sees underwriters ‘leveraging a convergence of data, technology, and human capital to transform insurance.’ By automating manual processes, and using alternative data sources to inform risk assessments, underwriters can create more value in their roles and become the ‘risk detectives’ they need to be. Insurers are learning it does not take a multi-million-dollar project to transform current underwriting methods. All it takes is a change in paradigm, a willingness to experiment, and modern technology. 

This technology already exists and innovative insurers are using it. In the life and health insurance industry, underwriters may still need specific data points on negative medical history, but the vast majority of this data is pulled – via automation – from external data sources such as; credit history, motor vehicle records, electronic health records, social media, connected devices and other third-party sources. This approach is less time intensive. Technology does the heavy lifting, so underwriters can focus on higher value tasks. The customer also benefits from a quicker, frictionless experience. More speed, more policies underwritten. And because the underwriter is using verified data, the risk profile and underlying algorithms are more accurate. 

A new mind-set for P&C insurance

So how can P&C insurers emulate the underwriting approach of their life and health counterparts, and enable the ‘exponential underwriters’ of tomorrow?

We need a new, systematic approach. The first step is getting the leaders of underwriting to think about the function in a digital way, and embrace automation. Think about the core components of the underwriting process and challenge whether efficiencies can be made through applying digital technologies or new data sources. The second is addressing the perception that legacy systems need to be ripped and replaced to enable a digitally-enhanced underwriting process. This is not the case. Instead, P&C insurers should examine core processes, understand the rationale behind each step and agree on the value it adds to the customer. This thought process alone could generate ideas for transformation. For example, is data available to query automatically when underwriting risk for a skyscraper or an apple orchard? Yes! Keep it simple. Assess the areas that need the most attention to make the back office efficient and the customer happy. 

The future is now

Only when insurers have mastered this new paradigm should they then think about technology. This requires insurers to envision how they could assess risk differently. Question each piece of data used in underwriting and be confident about why it is necessary. If an underwriter needs to capture data quickly, introduce automation. If underwriters need to draft a risk assessment, implement Artificial Intelligence (AI) to help with the first draft. If a high percentage of time is spent web searching, assess different methods to carry out this task. 

There are over 500 Insurtech companies today, many of which are rich with data. Searching for the right technology may have taken a lot of time and energy years ago. But this has changed dramatically in the last five years. There are cloud-native policy administration platforms available today that enable underwriters to integrate with a host of third-party data sources through APIs. By liberating underwriters from the confines of previously laborious processes, insurers can achieve impressive gains with breakneck speed. Tapping into these companies, their technologies and/or data sources will be too costly for insurers to ignore if they want to remain competitive and relevant in an industry on the cusp of a digital revolution. 

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