Underwriting transformation in the digital era
Article Synopsis :
This report from EY is based on a global survey of business and IT executives at more than 40 carrier, broker and InsurTech firms. The survey is the first to focus exclusively on the impact of digital technologies in the middle market and large commercial and specialty segments across Property, Liability, Auto, Inland Marine, Professional Liability, Umbrella, and Excess lines.
Five key themes emerge from the survey:
- Predictive analytics, big data, underwriting trading platforms and geographic information systems (GIS) are the most mature technologies currently being adopted. More than half of respondents indicate these technologies are in the rollout or refinement stage. However, these technologies have been narrowly focused on just a few specific areas (such as pricing models and demographic and location data).
- Blockchain, robotic process automation (RPA) and sensor-based technologies are all high priorities for the future, with organizations planning to commit significant resources. Currently, most insurers engaged with these technologies report activity in the context of research programs, PoCs, or pilots.
- There is a strong need for longer and closer monitoring of early stage investments and the potential need for more rigor in business case development. Insurers currently measuring investment performance report strong, even compelling, returns, with most meeting or exceeding expectations.
- Insurers and brokers agree that underwriting and pricing capabilities are the most important and potentially valuable in terms of future technology investments. These functions and processes have been augmented by the more mature technologies (predictive analytics, big data, automated portfolio management, underwriting trading platforms and GIS), as well as machine learning and sensor-based technologies.
- Actuarial has benefited the most from predictive analytics and machine learning, while policy processing has been the focus of RPA initiatives. Product management capabilities have benefited from big data and automated portfolio management.
The value proposition for digital enablement is strong across and throughout the underwriting function. That said, digital is as much about culture as it is about tools, and underwriting organizations may have a way to go on the cultural front. One reason for the limited uptake of digital in underwriting seems to be the lack of a single unifying vision or leadership sponsor within underwriting. For business value to be realized fully and sustainably, underwriting needs to work more closely with IT and other partners to define and prioritize use cases for targeted digital technologies.
This report contains a trove of fine-grained detail, including a capability-area heat map, current-state benefits, and future-state benefits across the twelve featured technologies, ranging from predictive analytics through the semantic web. There are also discussions on resource planning, the broker of the future, and underwriting from the broker perspective. Check it out.
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Digital Insurer's CommentsOf all insurance functions underwriting figures to be most impacted by the coming wave of cognitive tools. This is actually good news for underwriters as the future of underwriting—those who embrace it, that is—actually involves expanded human roles and higher-value activities transcending conventional risk evaluation and selection.
Traditional knowledge of products and markets must expand to the realms of analytics and decision science, with on-the-job learning as a vital component. Curiosity, and hunger to learn, are key traits marking the successful underwriter of the future.
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