Tag Archives: underwriting

Underwriting in the Digital Age

Underwriters in the commercial market are, in some ways, facing a promising future: Valuate Reports recently estimated that the segment’s compound annual growth rate through 2028 would be 8.5% — a healthy clip by any standard. This is far above the overall average direct written premium (DWP) growth rate of 3% to 4% over the last decade or more.

Yet market research indicates that, while commercial carriers are adopting digital technologies and next-gen core systems at a rapid pace, age-old manual underwriting processes and lack of relevant data when they need it continue to cause bottlenecks and friction, leaving customers, underwriters and brokers frustrated.

Businesses insurance premiums are now at $350 billion annually, but the workflow generally remains paper-based. Only 25% of an underwriter’s day is spent on selling and broker engagement. Underwriters are spending entirely too much time on core processing and other non-sales work.

Imagine if underwriters could spend more time with their customers and focus on delivering a better customer experience instead of being bogged down by cumbersome, error-prone manual processes and information gathering. Imagine having intelligent, relevant information pushed to the underwriters’ fingertips at the exact moment they need it, empowering them to make better decisions.

As an industry, we are on the cusp of making this vision a reality. SMA research indicates a gap between what insurers do today and what is needed today and in the future. In fact, 80% of insurance executives expect underwriting roles to be significantly different in the next five years. They know they must evolve underwriting to make their companies competitive amid the rapid changes in customer needs and expectations, new digital technologies and data sources and increasing competition from both established players and new entrants.

This evolution will be powered by a next-generation underwriting workbench that leverages an easily customizable and scalable digital platform, robust data-ingestion capabilities, AI and machine learning and new communication and collaboration tools across commercial and specialty lines of business.

In addition to tedious, time-consuming tasks of manually gathering data, the most glaring pain points to be addressed are:

  • A lack of an integrated and unified view for underwriters to access risks and make quick decisions
  • The absence of holistic policy data at a single place to enable quick and accurate underwriting case management
  • An overdependence on underwriters for making key decisions
  • The lack of sufficient time for underwriters to develop relationships with distributors, given inadequate system capabilities
  • Inefficient collaboration and communication channels between underwriter and distributors
  • A need for constant follow-ups with line managers for updates, resulting in longer waits for closing out open cases, leading to poor experience

Progress depends on the creation of an end-to-end underwriter workflow and case-management capability. It requires a capability for intelligent data ingestion and extraction, coupled with standardized and automated processing.

A key in making underwriting work better, faster and in a cost-effective way is increased and predictable collaboration between the broker/agent and the underwriter. Ultimately, there is great value for the business by being highly responsive to customers through transparent collaboration among underwriters and brokers.

Next-generation underwriting capabilities are here. The challenge for the industry is in adopting a mind-set that permits digital transformation to take root and grow.

We believe performance excellence will flourish when insurers embrace change, leverage powerful new technologies and adopt new ways of working that are evolving at a rapid pace.

Mike Adler, principal, KPMG, and Denise Garth, chief strategy officer, Majesco, are co-authors of this article. Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities

Six Things Newsletter | April 13, 2021

Microsoft Just Raised the Bar

Paul Carroll, Editor-in-Chief of ITL

While insurance has been steadily improving communications with customers through gradual adoption of chatbots, Microsoft just put another big item on the industry’s technology to-do list: speech recognition.

Microsoft’s announcement on Monday that it is buying speech-recognition firm Nuance for $16 billion means that insurers will have to confront the technology — likely sooner than they had expected. Big Tech has already been getting consumers accustomed to having their speech understood by devices, mostly via Siri and Alexa, and the Microsoft purchase of Nuance will push speech recognition into many business transactions. All industries, including insurance, will have to react as Big Tech again raises the bar for what constitutes a reasonable customer experience.

So, it’s worth spending a minute thinking about what speech recognition will — and won’t — change in insurance… continue reading >

Majesco Webinar

The pace of change has accelerated to hyper-speed, making digital insurance business models more important than ever. Learn what the Leaders are doing.

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The Future of AI in Insurance
by Karin Golde

Organizations hoping to deploy artificial intelligence have to know what problems they’re solving — no vague questions allowed.

Read More

10 Ways to Prepare for the Hard Market
by Jeff Arnold

In soft markets, differentiation can be challenging. But hard markets present an opportunity for the best insurance professionals to stand apart.

Read More

Digital Revolution Reaches Underwriting
sponsored by Intellect SEEC

The digital revolution in insurance, which began in distribution and then spread to claims, has now reached underwriting in a big way.

Read More

How to Deliver the ROI From AI
by Monte Zweben

A technology has emerged that can harness AI across all departments of a business like never before. It’s called a feature store.

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Benchmarks, Analytics Post-COVID
by Kimberly George and Mark Walls

The pandemic introduced several variables that question the validity of actuarial models and benchmarks.

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The Key to the Future of Mobility
by Bill Powers

Telematics can help solve some of the insurance industry’s oldest problems, but, first, insurers must win the client’s trust.

Read More

Time to Start Over on Secondary Towing
by Rochelle Thielen

The current system for secondary towing is excruciating. The only reasonable solution is to start over from scratch.

Read More

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The Alarming Surge in Ransomware Attacks

sponsored by Tokio Marine HCC – Cyber & Professional Lines Group

Join Michael Palotay, Chief Underwriting Officer for Tokio Marine HCC – Cyber & Professional Lines, and Paul Carroll as they continue their discussion on ransomware, cyber attacks, and how businesses can protect themselves.

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April’s Topic: Agents & Brokers

Mark Twain reportedly once responded to a rumor of a serious illness by saying, “Rumors of my death have been greatly exaggerated.”  Insurance agents and brokers could have said the same thing over the past decade and will likely be parrying those rumors for years to come.

There’s no doubt that agents & brokers inhabit a world going digital and not every agent will migrate easily into the ever-more-digital world, but those who do will find the work more rewarding, both for themselves and for their ever-more-loyal clients.

Take Me There

The Alarming Surge in Ransomware Attacks

Join Michael Palotay, Chief Underwriting Officer for Tokio Marine HCC – Cyber & Professional Lines, and Paul Carroll as they continue their discussion on ransomware, cyber attacks, and how businesses can protect themselves.

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Digital Revolution Reaches Underwriting

The digital revolution in insurance, which began in distribution and then spread to claims, has now reached underwriting in a big way.

There are two consistent themes: 1) Advanced AI and ML technologies, paired with big data and sophisticated risk models, are fundamentally shifting the way underwriting is done. 2) Insurers are leveraging low-cost, cloud platforms that are built for scale and agility with new business models.

In this article, we will explore those two themes and show how digitization streamlines the underwriting process for a more efficient and sophisticated outcome. In our next article, we will explore how carriers are making the shift to next-generation underwriting, changes to user journeys and experience, and measuring ROI in these AI journeys. 

Role of Underwriter in Age of Insurtech

The age of insurtech has brought a wave of new digital experiences and automation in insurance. From websites that instantaneously compare auto insurance quotes to mobile apps that allow us to submit claims directly by snapping a picture of a damaged window, we continue to benefit from significant improvements to the insured experience.

These improvements in distribution and claims are part of an industry-wide appetite for increased accuracy and efficiency, including in underwriting. Personal lines carriers have already made good strides, and carriers see a similar opportunity to improve loss and expense ratios in commercial lines.

For small business policies that involve a high volume of submissions and lower premiums, the challenge is to enable an efficient, high-throughput underwriting process that complies with exacting standards for quality. In the mid-market, the stakes are even higher for underwriters. They must be diligent about selecting high-quality risk against a backdrop of declining capacity and a tsunami of submissions from brokers who remarket risks in search of better rates.

While the goal of shorter time-to-quote is laudable, and addresses a critical frustration for insureds and brokers, the implementation often overlooks the crucial role that underwriters play. By failing to listen to underwriters’ needs and play to their strengths as expert assessors of risk, technology providers and insurers alike continue to achieve sub-optimal underwriting outcomes.

Commercial underwriters are at the forefront of some of the most challenging and important work in the industry. They serve a multi-faceted role: developing and fostering relationships with brokers, exhaustively reviewing submissions, validating an insured’s business and property information, analyzing exposures and, eventually, rating, quoting and binding policies. Underwriters must bridge the gap between carriers that set aggressive goals for profitable premium growth and brokers who want a quote “yesterday” — and often pair incomplete submissions with demands for a rapid turnaround.

When underwriters conduct a thorough investigation of the risk – executing online searches, ordering inspections and asking tough questions, they’re invariably perceived as being too slow, inflexible and uncooperative. If they compromise on thoroughness to increase throughput, or if too many submissions are superficially passed through, their book may grow quickly, but the quality and profitability will suffer. All the while, underwriters want to deliver a comprehensive policy that best addresses the insured’s needs and grows the relationship. Reconciling these often-conflicting priorities is difficult but sets the most effective and experienced underwriters apart.

Data analytics, artificial intelligence and machine learning can make a big difference but, for most insurers, have failed to deliver great value within underwriting.

Improving outcomes requires an approach that combines the best of underwriter judgment with machine intelligence.

See also: The Future of Underwriting

Specialized, AI-powered software can now do much of the heavy lifting for underwriters, while eliminating frustrating activities. Underwriters who experiment with, and embrace, new technologies are already setting themselves apart from their peers. They stand to improve their individual performance and also help to chart the future course of underwriting within their organizations.

For insurtechs to truly deliver on their collective promise, they need to empower those who are actually performing the work of insurance. Automation and machine learning need to be force multipliers for underwriting excellence – not poor substitutes for it. Getting this right will lead to a better experience for the insured and superior outcomes for the industry.

The Next Wave of Insurtech

Long before the COVID-19 pandemic, insurers were investing in digital transformation, spurred by the rise of startups. Those investments took on new urgency as the pandemic forced businesses across industries to move to digital operations to stay afloat. 

Over the long term, no technology will prove as vital to insurers’ agility and success as artificial intelligence, whose far-reaching impact will define the next wave of insurtech innovation.

Legacy players and nascent startups alike will leverage AI and machine learning to enhance customer service, speed claims processing and improve the accuracy of underwriting – enabling insurers to match customers to the right products, operate with greater efficiency and achieve better results.

Though insurance is often cast as slow to embrace technology and innovation, in a certain respect AI is very much within the industry’s wheelhouse. Since the first actuaries began their work in the 17th century, insurance has relied heavily on data – and as AI empowers insurers to do even more with vast swaths of data, the benefits will redound to providers and policyholders alike.

Bringing Customer Service to the Next Level

In today’s digital economy, personalization is all the rage. Customers crave tailored, relevant experiences, offers and promotions that reflect their unique backgrounds, needs and interests – and they increasingly expect businesses to deliver these experiences as a basic standard of service.

While personalization is often discussed in the context of sectors like e-commerce, the insurance industry is no exception to this trend. According to an Accenture survey, 80% of customers expect their insurance providers to customize offers, pricing and recommendations. 

Of course, delivering bespoke experiences requires an abundance of customer data – and customers are more than willing to provide it in exchange for personalized service; 77% told Accenture that they’d share their data to receive lower premiums, quicker claims settlement or better coverage recommendations. 

Because personalization can only deliver on its promise if it’s holistic and omnichannel, the most successful insurers will be those that don’t view personalized engagements as one-offs – a tailored email here, a promotion there – but that consistently provide personalization at every stage of the customer journey. 

What will that look like in practice? AI chatbots will become a lot more “chat” and a lot less “bot,” not only providing 24/7 customer service but also using cutting-edge methods like natural language processing (NLP) to better understand what customers actually need and to conduct more natural, intuitive conversations. Underwriting will become much more precise as machines crunch massive sets of data – reams of usage and behavioral data generated by customers and their IoT devices, as well as relevant geographic, historic and other information – to create customized policies that reflect a policyholder’s true level of risk. 

See also: Insurtechs’ Role in Transformation

From Cumbersome to Swift

Harnessing the power of AI, insurers can also streamline claims processing as part of a comprehensive digital strategy. Forward-thinking providers will increasingly integrate automated customer service apps into their offerings. These apps will handle most policyholder interactions through voice and text, directly following self-learning scripts that will be designed to interface with the claims, fraud, medical service and policy systems. 

As a McKinsey analysis noted, with automated claims processing, the turnaround time for settlement and claims resolution will start to be measured in minutes rather than days or weeks. Meanwhile, human claims management associates will be free to shift their focus to more complicated claims, where their insights, experience and expertise are truly needed. 

These transformative applications of AI will unlock revenue opportunities, improve risk management and help insurers deliver a new level of personalized customer service. But if AI will act as the great enabler, what will enable AI itself?

The answer lies in a robust digital core, which is vital to facilitating efficient business processes, maintaining resilience in an unpredictable world and supporting the rollout of new products and business offerings. Whether insurers manage to achieve that kind of digital agility will determine their ability to survive and thrive in a landscape that’s shifting faster than ever.