Other parts of this series:
- Multi-channel selling will shape the future of underwriting
- Underwriting needs to better manage new providers and tools
- Underwriting needs to climb the mountain of data in the digital age
- Underwriting management needs to lead the way in the digital ecosystem
- The future of the underwriting process in the digital age
As the insurance industry transforms to keep pace with the emerging digital world, underwriting is one of the areas that most needs to evolve. Commercial carriers have seen changes in how they sell products (from agents to online aggregators), what they sell (a move from risk protection services into value-added offerings) and in new providers joining the marketplace (the rise of startups and peer-to-peer networks). So, how will underwriters thrive in the future?
In this series of blog posts, we are going to examine five key components that underwriting organizations need to consider and redevelop as the industry moves toward a digital ecosystem:
- Channels and offerings
- Tools and services
- Data and underwriting analysis
- Underwriting management and operations
- The underwriting process
The first way that underwriting needs to adapt is in the channels where we sell insurance. While agents and brokers will remain a predominant channel, changes within it, as well as emerging new channels, create both threats and opportunities for carriers.
In the core agent and broker channel, consolidation is continuing. While overall concentrations in most lines remain small, it is nevertheless putting increased pressure on price. This is especially true for some of the larger brokers who are reducing the number of carriers they represent in order to improve efficiency.
At the same time, new channels are emerging. Digital exchange players such as Insurian are starting to pick up pace and small commercial direct players such as Hiscox are starting to get some traction. We are also seeing some new plays in the industry exploring peer-to-peer markets, such as Friendsurance, or POS offerings such as the free protection Carpisa provides for its luggage customers.
For commercial carriers, this means that they need to be prepared to support the underwriting function through a multitude of different channels, each with its own requirements.
As the underwriting channels are changing, so are the services that carriers are providing. Pressured to gain margin, improve competitiveness and address the capabilities of new entrants, they are moving beyond traditional offerings into broader value-added services in risk prevention.
These new service offerings can be simple additions to the core policy, i.e., a South African auto insurer now offers a parking app to policyholders. Other offerings include the use of connected devices for the home or more advanced Internet-of-Things-based coverage that can lower risk or even move coverage toward a usage-based model.
Underwriting needs to adapt to the changes in product offerings and be able to evaluate, rate, price, and negotiate not just the core insurance policy as it did in the past. The digital future requires underwriters to reconsider the full offering of services they provide for the insured.
Join us for the next parts in the series, when we look at how the tools and services that underwriting uses are evolving in the new digital underwriting ecosystem.