As the insurance industry continues to navigate the pace of change, complexity and uncertainty in our world, consumers continue to respond, expecting companies to be more responsive to their needs. This year’s underwriting predictions offer guidance on how carriers can respond faster.
1. Evolving cognitive technologies will help insurers capture opportunity from more discrete market segments
Technological advances in AI and data analytics are helping insurers further refine market segments. As these more discrete segments grow, so too does the opportunity for insurers to address them with new products and services offered through a wider range of digital distribution channels. One such channel is embedded insurance—placing insurance in the customer journeys of non-insurance companies—for example, offering life insurance during the process of applying for a mortgage.
New cognitive insurance platforms underpin these new products and distribution channels providing life carriers with a way to capture that opportunity, and as these platforms evolve, they hold tremendous potential for the underwriting function. Already, these insurance platforms are automating evidence gathering and providing recommendations based on a continuously updated data analytics engine. With this level of automation and intelligence, underwriting decisions can be made in real time. Those cases requiring further scrutiny are then automatically referred to a human underwriter. With much of the evidence gathering already completed, the human underwriter is free to focus on further analysis, leading to more efficient decision making—a clear competitive advantage in fast-moving digital distribution channels. We believe innovation in this area will continue to evolve over the next year. In fact, our report Fuel the Future of Insurance describes on page 11 how a life insurer in China is improving operating efficiency and customer experience by leveraging AI and a smart algorithm.
2. Customer experience will continue to drive underwriting innovation
In last year’s underwriting predictions, I discussed how customer experience will determine who wins the digital competition for new business. We expect this trend to continue, but with a heightened awareness of consumer expectations and how insurers can respond more quickly to their changing needs. For example, our Accenture Insurance Consumer Study research identified that millennial and younger consumers aren’t the only cohort embracing a digital experience. The 55 and older cohort is becoming more comfortable with digital interactions. And if insurers are to attract and retain customers, a digital customer experience is table stakes. Underwriting plays a pivotal role in supporting the digital customer experience, especially with the proliferation of customer experience technologies available through ecosystem partners.
As our industry shifts from indemnity to protection products, digital technologies will be essential to providing differentiated experiences that leverage these platforms and ecosystems to capture opportunity from new product innovations. We believe product and underwriting innovation will provide a significant source of revenue over the next several years. However, it will require expanded use of AI, automation, data analytics and cloud to profitably drive revenue.
As insurers modernize their legacy core systems, freeing siloed data, they’re able to automate their underwriting workflows to provide a faster digital buying experience, while connecting to additional data sources that help them apply the appropriate level of risk management. Not only does this shorten underwriting timeframes and reduce costs, it also improves the customer (and underwriter) experience. Likewise, it supports the advanced experience consumers are looking for—seamless, proactive, and personalized.
According to a Gartner® report (Richard Natale, Kimberly Harris-Ferrante, August 2022), “By 2027, digitally engineered underwriting will have reached mainstream adoption in the life insurance industry, resulting in significantly increased revenue and underwriting profitability and improved customer experience.”
3. Human + Machine operating models will help alleviate underwriting skills shortages
Digital technologies such as AI and automation are not replacing underwriting jobs. On the contrary, these technologies will become even more necessary as insurers face continued skilled labor shortages. Moreover, they will need a talent and investment strategy that targets digital skills in data analytics and no-/low-code capabilities along with the use of flexible workforces to optimize the underwriting function.
For example, with the growing use of third-party data, AI and automation provide an efficient way to ingest data and make it useful to underwriters. This frees underwriters to do what they do best—assess and price risk—while driving timely, effective decision making. What’s stopping them is the administrative work that takes up 40 percent of their time, according to our survey of 500 U.S. life insurance underwriters.
The first step is to improve the efficiency of back-end underwriting operations. Interoperability is key to simplifying all customer-facing functions including product distribution, marketing, sales, service and commerce in addition to using an integrated technology stack across platforms and ecosystems. The cognitive platforms described above can help here too. As insurers improve their digital capabilities to quickly address consumers’ ever-changing needs with even more discrete insurance products and distribution channels, underwriting capacity will have to keep pace. This human + machine combination can facilitate a better experience for underwriters and potential policyholders.
This is good news for the insurance value chain and further reinforces my optimism about our industry and insurers’ abilities to meet the challenges and opportunities that lie ahead. We’re prepared to help. Let’s talk about getting the most from your technology and human ingenuity.