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March 18, 2020

3 Key Enablers for Better Underwriting

Summary:

While the insurance industry is a late adopter, carriers and insurtechs can take advantage of a market that is ripe for change.

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Within the commercial property and casualty sector, there has been a lot of attention on the underwriting process, which is inherently manual and time-consuming. Carriers and insurtechs are primarily trying to accomplish two things: make it easier for the end user to buy insurance and improve the accuracy and efficiency of underwriting.

These two goals complement each other. By tapping into third-party data sources, carriers can get more accurate information. Carriers also increase ease of doing business, for both underwriters and customers.

To date, carriers have leveraged in-house tools and partnered with technology providers to gain information for underwriting. Property sensors, public records, telematics and drones are just a few of the sources underwriters are using to access risk. But to stay competitive against other carriers and to continue to cut down on the number of questions that will need to be answered by the applicant, carriers need to continue to innovate.

See also: Winning in Small Commercial Lines  

An Accenture report centered on the rise of insurtech found that 86% of insurers believe innovation must happen faster. So, what can carriers do to boost their underwriting game?

  1. Start with areas that are aligned with strategic objectives: Insurance carriers need to think more strategically about innovation. Areas of investment in innovation need to tie directly to where you want to grow or improve from a business perspective. It is easier to gain internal buy-in and traction on topics that everybody already agrees need the most attention.
  2. Understand operational readiness for prioritized uses: Before any investment takes place, business leaders must understand what it would take to put an idea into production. In many cases, a clear path to test a new capability is identified–e.g.. limited proof of concept (POC)–but the actual requirements, timeline and costs (rough order of magnitude) in a production scenario are not analyzed or understood. Early focus on the desired end state can set the proper vision and avoid stalls and misdirection later on. 
  3. Make it easy to collaborate. The thing that insurance carriers that have strong innovation programs have in common is that they are not afraid to collaborate with insurtech partners. Today’s insurtechs are building niche businesses that can be tapped to enhance specific parts of the insurance value chain, often far faster than a carrier’s internal capabilities could allow on their own. Leading-edge carriers are collaborative and oriented toward feedback. The approach by insurtechs creates a healthy ecosystem and promotes effective product development.  

Once a carrier implements new technologies in the underwriting process, the organization should ensure that it is measuring the improvements in accuracy and efficiency. One way is to look at the organization’s overall profitability. Another is to look at team productivity–if measures have been put in place to boost efficiency and accuracy, the same underwriting team should be able to quote more policies than before, and more quotes should be “bindable.”

Agents will find it easier to do business with carriers that operate more efficiently and effectively.

While the insurance industry has fallen into the late adopter category, carriers and insurtechs have the opportunity to take advantage of a market that is ripe for change. 

See also: The New IoT Wave: Small Commercial  

DataCubes focuses on powering commercial underwriting using decision science. The organization was built on the idea that there is a more productive way to underwrite.

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About the Author

Harish Neelamana is co-founder and president at DataCubes. He is the creator and original architect of the d3 CORE decision science platform, which has enabled carriers to rapidly adopt new distribution models and enhance digital customer experiences.

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