Recently, there has been a seismic shift in the C-suite with most the likes of the CFO and CIO, among others, taking on much more strategic roles in the business. One roll though, that has largely remained unchanged for decades is that of the Chief Underwriting Officer. Historically sitting at the end of the pipeline, the CUO has not been in a position to drive meaningful strategic change for the business. It’s time for that to change.

As with most long-term problems, this was brought about by unintended consequences. Most carriers have long split their underwriting functions along market segments or lines of business. Holding underwriters accountable for profit and loss like this has driven internal competition and tactical success. It has also fragmented underwriting processes, operations, data and systems.

For most P&C and life carriers today, underwriting is more expensive than it needs to be and less efficient than it should be, at a time when the underwriting environment is becoming more complex. Producers, agents, brokers, and customers all expect faster, more accurate quotes. Risk evaluation is being complicated by new exposures and data sources.

The good news is that it doesn’t have to be this way.

The five challenges to underwriting transformation

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In a new paper on underwriting transformation I wrote with my colleague Kym Gully, we lay out five strategic challenges facing underwriting today.

The first is in underwriting operations, which is facing pressure to significantly reduce costs while maintaining or improving quality. This is particularly important (and difficult) given recent changes in major risk demographics, which have been accelerated by the pandemic.

The second is underwriting platforms. In general, carriers are unsatisfied with their underwriting systems, workflows, and analytics skills. Many don’t deliver on one or more of the three must-have capabilities of a modern underwriting capability:

  1. Rating and quoting solutions that quickly set up rate, and price packages
  2. Workflow solutions that efficiently manage submissions, teams, documents and data
  3. Use of emerging data platforms

The third is the growing need to innovate. The market landscape is shifting rapidly thanks to significant changes in both product and distribution. Online brokers and point-of-sale intermediaries are creating new distribution channels. OEMs and OSPs are becoming sales channels or competitors. These changes are pushing underwriting out of the “policy administration” role it has become comfortable with since the early 2000s.

The fourth is evolving customer needs and expectations, which has been supercharged by the COVID-19 pandemic. After being forced to take the plunge, many digital holdouts are now familiar and even comfortable with digital shopping. These expectations will carry over to carriers.

The final challenge we identify is the massive amount of new information available to underwriters. This can also be a blessing for underwriting, but most underwriting teams are not equipped to evaluate, select, and integrate the new data sources available.

The emerging role of the CUO

While these five challenges are all complex, we believe there’s one relatively simple move that carriers can make that will result in real progress on all of them: making their Chief Underwriting Officers independent and strategic voices in the boardroom.

The CUO has traditionally focused on maintaining underwriting standards, driving quality, and balancing capital use across the organization. Setting the underwriting strategy is not usually their territory.

This disconnect, we argue, is behind the underwriting challenges now facing carriers. Transforming underwriting will require a level of commitment and investment that’s hard for a single division to reach on its own. If insurers are to become future-ready organizations, they need to elevate the role of the CUO to a strategic one, just as the CIO, CFO, and COO roles have changed in recent years.

If you’re considering changing your own underwriting function, I’d love to hear from you. You can also find the full paper I co-authored with Kym, which includes three steps for CUOs to transform underwriting at a strategic level, here.