Ahhh…summer! A time for weddings, barbeques, and for many insurance carriers, the start of their strategic budget planning for the next fiscal year. For underwriting departments, this ritual has fallen into a predictable path.
Each year, underwriters have to evaluate three critical maintenance areas:
- Pricing updates
- Forms updates
- Resolution of compliance issues
Also every year, underwriters have large-scale programs to launch:
- UW desktops/automation
- Policy administration system replacements
- Underwriting data warehouse/analytics programs
The first of these buckets usually has a defined dollar figure and underwriters prioritize these revisions based on size, benefit or urgency. Most often, the product line performing the worst becomes the highest priority for pricing or forms changes.
The second bucket falls into one of two categories. For those underwriters who have managed to start one of these large-scale programs, the key is to continue its funding, in an effort to support that core project. Managers support these projects with the usual rallying cries: “This is our biggest investment in the last 10 years and all attention and investment needs to stay focused on it!”
If an underwriting group doesn’t have one of these projects going, then it is fighting with other strategic priorities from finance and claims to make this the year to get started. In either case, underwriters focus their attention on maintenance activities or a single large investment.
One of the keys to achieving the maximum benefits of a large-scale system implementation is to ensure sufficient management focus. The problem is that this singular focus is tied to a fallacy. It assumes that the rest of the industry is standing still while you make this strategic investment. But it isn’t. So where will you be after that big three-year foundation investment if you don’t also consider the future?
Today, underwriting is changing rapidly, with several forces that are creating and shaping a digital insurance ecosystem:
- New data sources and analytics to support underwriting
- Robotics and outsourcing to reduce costs and improve efficiency
- The Internet of Things leading to new modes of insurance and new types of service
- Changes in distribution with new channels
- Early use of artificial intelligence and machines to support underwriting
So underwriting leaders, as you put together your strategic budget of critical maintenance and large-scale investments, consider putting some funds aside to invest in the future of underwriting that is emerging before us. This will be key to thriving in the new digital insurance ecosystem.