Other parts of this series:
- Evolving insurance ecosystem requires overhaul of underwriting function
- Solution-oriented products, market awareness two key traits of digital underwriters
- Technology, analytics will play critical role in underwriting for digital underwriters
- Cost-efficiencies, channel-intimate approach vital for carriers evolving into digital underwriters
- The digital underwriter: How underwriting leaders must evolve; and quickly starting your organization’s evolution
Nine out of 10 carriers are investing in their underwriting functions or plan to over the next three years, I note in the Accenture report, Insurance strategy: Evolving into a digital underwriter. But will those investments leave carriers with the traits they need to thrive in the evolving insurance ecosystem?
In this post, I examine two of the vital traits carriers must have: cost-efficient underwriting processes and a channel-intimate approach.
Accenture’s Digital Innovation Survey found that 39 percent of insurers expect to lose some margin as the insurance industry increasingly turns to digital technologies. To compete as digital underwriters, carriers will have to be more cost-efficient. That will entail more of their underwriting functions focusing on portfolio underwriting, rather than evaluating individual risks. To that end, here are several ideas that evidence shows can cut costs more than 30 percent:
- Improve end-to-end processing, focusing on increasing hit and retention ratios.
- Use robotics, predictive models, cognitive computing, workflow and rules engines to improve automation and straight-through processing.
- Extend underwriting and operations processes to producers and customers to initiate or complete set transactions on-line.
- Adopt improved collaboration technologies in various functions to increase speed across the organization.
- Use analytics and knowledge systems to gather and provide information at the point of need, easing the underwriter’s data-gathering burden.
Digital underwriters also need to address the cost effectiveness of their technology—one of their highest expenses—so that it also contributes to the bottom line. Carriers should encourage their IT functions to be more responsive to both technology change and technology needs by considering faster and more agile solutions, such as software as a service, cloud-based computing and analytical services.
Even as digital underwriters adopt automated underwriting processes, core underwriters will continue to handle complex risks. But in either case, the disruption of the traditional insurance distribution system due to consolidation, new players and alternative models means that some risks will be written outside of the digital underwriter’s walls. Wholesalers, online marketplaces, and even some direct point-of-sale options require carriers to support external underwriting and pricing of selected risk profiles.
The digital underwriter’s underwriting function needs to respond nimbly to this development. The successful digital underwriter will adapt to the unique needs of each channel but still maintain the discipline, controls and monitoring necessary to ensure that the risks they underwrite remain profitable.
Next time: Underwriters’ roles in the nimble organization and a 90-day quick-start plan.
To learn more in the meantime, download this report: Insurance strategy: Evolving into a digital underwriter