Underwriting in insurance can make a competitive difference. Most insurers don’t argue this fact. Is the difference enough, however, to undergo a major underwriting transformation effort? Yes, but what if underwriting could undergo a major leap forward without a major transformation effort? What if new technology could bridge the gap between nearly any type of system? What if the technology itself could act as a process re-learning system — advancing underwriting roles as it dramatically improves underwriting results? This is the promise of digital technology applied to underwriting. It’s now possible to do more and chart a course for change that improves as it educates, all while utilizing the expertise of the underwriter.
Commercial underwriting is in the midst of this shift.
Commercial lines insurers are now presented with new opportunities for digitally-optimized underwriting that will forever change how they do business. It will match customer expectations, serve brokers well, and ease some of the burden that had previously been placed upon underwriting. Of course, underwriting in every line of insurance has gone through a sort of existential dilemma. What is an underwriter supposed to be? What is the role of the underwriter supposed to look like? Is technology changing the definition of underwriter or will we one day call underwriters something completely different?
Though the core of underwriting (risk assessment and selection) may never change, the role of the underwriter is definitely changing…for the better! New tools and new sources of data provide new insights. Automation will streamline and improve risk assessment. Better visibility into books of business will allow underwriters to expertly guide the business in what risks to underwrite and the directions it needs to go.
In last week’s blog, Mike Adler, Principal, KPMG, and I reviewed the business case for a next-generation underwriting workbench, jointly developed and soon to be launched by Majesco. Its release comes at the perfect time, as commercial lines insurers are considering new underwriting methodologies that include a re-imagining of people, data, technology and processes.
To give us some perspective on these industry changes, we asked experts from KPMG, Strategy Meets Action and Majesco to participate in a Majesco webinar and demo entitled The Next Competitive Frontier of Commercial Underwriting: Innovation and Transformation. Today, we’ll recap some of their wisdom and insights regarding commercial underwriting’s big shift. Our panel included myself and:
Deb Smallwood - Senior Partner, Strategy Meets Action
Lulu O'Leary - Partner Financial Services, KPMG
Jeanne Johnson - Principal U.S. Advisory Practice, KPMG
Nishit Shukla - VP Product Management, Majesco
We started by considering operational perspectives. I asked the panel,
“If we were redesigning the commercial underwriting process, what do companies need to be thinking about as they consider using a next generation underwriting workbench in a very digital world?”
Jeanne Johnson, KPMG
“We're seeing a lot of movement in the digital underwriting workbench space. I think insurers need to consider the key things that are really driving not just digitalization, but which capabilities, features and drivers are really shaping where underwriting can go?”
Lulu O’Leary, KPMG
“One of the really important drivers to change is data. Most underwriting companies have a huge amount of data, but they don't use it as effectively as they could. They recognize that data…alongside digital enablement…alongside machine learning, can actually be an inflection point in the industry.”
The data, Lulu pointed out, will allow for more business to be automatically underwritten, so the role of the underwriter will change.
“We’re moving very much towards a situation where the underwriter will become more of a portfolio manager than actually an underwriter. This will not happen across the most complex commercial business, but certainly across many other segments.”
Strategic opportunity as a driver of underwriting change
The availability of data has assisted with better risk analysis in the past, but there are growing new sources of data as well as combined sources that are now driving innovative commercial insurers to change their underwriting strategies. For example, when it comes to applications for new policies, many commercial insurers still commonly “take what they are given.” Whomever comes in the broker or agent door is a candidate. This could change with an underwriting methodology that lends itself to better proactive sales targeting. Could a digital-first underwriting workbench rewrite the rules of sales and distribution?
Lulu O’Leary, KPMG
“Insurers are looking for ways they can change their approach to distribution. New methods in underwriting can place insurers on the front foot with brokers, targeting the clients they wish to work with instead of simply responding to submissions. We're moving very much in a direction where commercial underwriting will be much more strategic in its approach to distribution and client acquisition. It will be more portfolio-driven across the segment in terms of how underwriters do their jobs. They will be able to prioritize and reinforce risk appetite by the use of data. Of course, most companies are still using legacy systems and, as a result, the journey is going to have to be taken in stages.”
The short-term goal for commercial lines insurers should be to understand the opportunity. Majesco, for example, never starts development on a new product until we understand how it will improve the experience across all parties. We survey our clients on what they see coming and we take the pulse of industry experts, like our panel, to see which experiences are ripe for improvement. In our webinar, Deb Smallwood walked us through the potential experience improvements for commercial lines underwriters.
“The industry has been digitizing, and automating and optimizing for several years, but this new technology will really enable us to innovate the roles and the processes. Imagine pushing information to the underwriters' fingertips at the exact moment they need it. Zero staff is engaged in data entry or information collection. Underwriting time is spent creating customer value, proactively solving problems and delighting agents and brokers while protecting and really balancing the bottom line with precision pricing. There is no wrestling with raters and tools and spreadsheets and handoffs. The underwriter is fully-empowered. They are able to look at the entire portfolio and change the work that's being done if that’s needed. Brokers and agents are also sharing that positive experience, full transparency, rocket turnaround, and consistency. It’s possible to get to this point today with the technology and the tools that are already available in the marketplace.”
From sequential underwriting to straight-through underwriting to real-time intelligent underwriting
What Jeanne, Lulu, and Deb have described is a capability set that transcends data usage and delivery with automated advanced analytical decisioning, but it will also cause commercial lines carriers to re-imagine roles and rewrite processes. Deb and Nishit both had input on these process enhancements.
“Right now, information comes in. It’s very sequential. There is a hand-off. It’s a two-way collaboration. What we need is to consider process and capabilities rather than a sequential transaction. So, when we start to look at technology enablement, insurers need systems and workbenches that can receive data and input from any source. They need to handle collaboration well. Our IT systems absolutely have to get to this no-code, low-code place where we have less IT dependency, making sure that we're agile and nimble to be able to change products, and processes.
“The new intelligent underwriting platform is one that sits on top of your core systems. It uses microservices and is API-native so that data can flow in and out and it’s more plug and play. It can be headless or have an advanced UI. It is completely flexible. It can be the underwriter desktop, or it could be a technology layer that just sits there. The workflow is non-traditional. It is rules-driven, and it provides that underwriter with information when they need it for the type of risk they are underwriting.”
What Deb described is designed for the future of commercial lines, but it is soon to be released in Majesco’s new Digital Underwriter360 for P&C. As Nishit provided a demonstration of the front-end workbench capabilities, he described the reality of what is going on in the background…all of the things that underwriters used to have to do manually, which are now automated and are improved consistently through AI and machine learning.
“Let’s say you have a small business and the broker has sent in the required application. They just want to do a quick submission to get a quote so they know what the premium will be before issuing the policy. You drag and drop the application and it activates the AI engine, gathering all of the property information, location detail, demographic data and so on. It automatically populates the data summary. It’s a low-touch application where nothing needs to be done manually to leverage all of the various integrations. The end user doesn’t care where the data is coming from and they have the ability to override anything the automated system has done. It is very intelligent digital underwriting.”
The proof is in the results
As a part of the demo, Nishit explained how AI technology can help wrangle volumes of data down into useful, visual narratives that will help underwriters both see and make better decisions. He also discussed how useful the portfolio view is to confirming that underwriting is doing its job in assessing risk.
“Some underwriters will actually say that they could survive without any of these new portfolio viewing capabilities…by just analyzing cases and issuing policies. But we can take it to the next level and leverage the data, validate the AI and empower the underwriter to make decisions upon the greater portfolio.”
Lulu O’Leary, KPMG
“The piece that will help us transform and convince underwriters to really embrace the data and the analytics and the AI is showing them results. So, making sure that we can prove to them that if they didn't use that data and they didn't use that model, they would receive different and less desirable results. The reluctancy to embrace these types of advancements over the years is evident, but if we can start to demonstrate success and optimal data pricing, I think we'll have more adoption.”
Where risk meets reality
Underwriting has evolved. Originally, it was calculated manual assessments. Then mathematics came into play. Estimates and pricing grew more complex. Regulation entered in. In many ways, the insurance proposition became all about managing the unknown factors by manipulating the math and adjusting risk tolerance. Today, the unknown is evaporating. Underwriting, pricing and profitability are able to be seen with greater transparency and in greater detail — whether that means peering into the granularity or taking in the 360° view of the whole portfolio.
Risk is meeting reality, perhaps for the first time, and reality is changing how commercial lines insurers are able to distribute and underwrite.
Are you ready for the change?
Get a glimpse into commercial underwriting’s future by viewing, The Next Competitive Frontier of Commercial Underwriting: Innovation and Transformation