September 13, 2017
How Underwriting Is Being Transformed
An EY survey finds that initial use cases are narrowly defined but that technologies are advancing key capabilities.
The recently completed EY Digital Underwriting Survey reveals the important and rapid evolution that is proceeding within commercial and specialty insurance. Further, it clarifies the digital technologies and capabilities that are the impetus behind some of the biggest changes to underwriting, the essential function within insurance.
The “big idea” behind the results confirms that more insurers recognize that the future is now when it comes to digital. Insurers are planning to accelerate and expand their investments and activities to embrace digital insurance in its many forms. Both
in response to the survey questions and in parallel interviews, the underwriting community expressed a belief that individual technologies are making a difference in advancing key capabilities, even if the initial use cases are narrowly defined.
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Looking at 12 specific technologies and capabilities, the survey findings reveal that most insurers are investing now and plan to continue to increase investing. Further, they expect to broaden how they use these technologies. The bottom line is that survey respondents see clear and ample opportunities to expand adoption and increase the value to their business.
Key themes emerging from the survey
- Predictive analytics, big data, underwriting trading platforms and geographic information systems (GIS) are the most mature technologies currently being adopted. More than half of respondents indicate these technologies are in the rollout or refinement stage. However, these technologies have been narrowly focused on just a few specific areas (such as pricing models and demographic and location data).
- Blockchain, robotic process automation (RPA) and sensor-based technologies are all high priorities for the future, with organizations planning to commit significant resources. Currently, most insurers engaged with these technologies report activity in the context of research programs, proof of concept or pilots.
- There is a strong need for longer and closer monitoring time of early-stage investments and the potential need for more rigor in business case development. Insurers currently measuring investment performance report strong, even compelling, returns, with most meeting or exceeding expectations.
- Insurers and brokers agree that underwriting and pricing capabilities are the most important and potentially valuable in terms of future technology investments. These functions and processes have been augmented by the more mature technologies (predictive analytics, big data, automated portfolio management, underwriting trading platforms and GIS), as well as machine learning and sensor-based technologies.
- Actuarial has benefited the most from predictive analytics and machine learning, while policy processing has been the focus of RPA initiatives. Product management capabilities have benefited from big data and automated portfolio management.
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The value proposition for digital enablement is strong across and throughout the underwriting function. Digital is as much about culture as it is about tool sets, and underwriting organizations may have a way to go on the cultural front. For example, one reason for the limited applications and narrow use cases is that digital may lack a single unifying vision or leadership sponsor within underwriting. For the business value to be realized in a full and sustainable fashion, with broad adoption, underwriting needs to work more closely with IT and other partners to define and prioritize the use cases for these digital technologies.
To see the full report follow this link to EY.com.