The Challenge of Digital Underwriting

Carrier Best Practices The Challenges of Digital Underwriting

There is a spirited, ongoing discussion around how carriers will adapt to digital underwriting. As a recent Accenture article states, “The entire insurance industry—its customer expectations, products, competitors, distribution channels, analytics and data technology—is evolving significantly and quickly. For carriers to compete and grow in this increasingly complex environment, underwriting will have to evolve, too. Carriers will have to do more than just familiarize themselves with digital tools; they need to transform into Digital Underwriters.”

Digital Underwriting

While it is clear that the industry faces a major transformation, exactly what digital underwriting entails—and who will be affected—is far less certain. For some, the answer is analytical. Viewed from this perspective, the role of underwriting is a function that can be reduced to simple decisions based solely on quantitative data. In The Competitive Advantage: The Death of Underwriting and Underwriters the authors summarize this position succinctly. “Underwriting is not dying. It is just being automated into digital algorithms versus analog human beings.”

Not everyone agrees, however, that wholesale automation of underwriting is the next logical step. Those pushing back on complete automation of underwriting functions point to the different nature of work in each line of business. As Nicole Mongillo responds in Why underwriting isn’t dead, “… there are a significant number of instances in which the underwriter’s job is far too complex for simple automation to take over. In commercial lines, technology and humans work together in the most efficient configuration to ensure that carriers write an optimal combination of both volume and quality of business.”

There is data to support the idea that underwriting commercial lines involves more complex decisions than in personal lines. The Channel Harvest Research Report was recently analyzed in an Insurance Journal article. The piece showed that independent agents and brokers with personal lines listed pricing, carrier tech, and customer service as factors that would be most important in the next five years. On the other hand, those focused on commercial lines indicated that underwriting would be the driving factor.

Digital Underwriting Infographic

Redefining the Underwriter

Rather than seeing the commercial underwriter as a function that will be completely automated, this view challenges the role of the underwriter itself. A Carrier Management article states: “Accordingly, the underwriter’s role as a decision maker is also evolving, with some underwriters now being called data scientists due to their use of analytics to measure and manage risk.” In this view, the value of the underwriter depends on their ability to aggregate all of the data involving a customer, and then apply perspective and judgement when analyzing the data.

In the article, Doug Moore, VP and CTO at ISCS, speaks about the importance of blending a 360-degree view of the client data with the unique skill set of an underwriter. He states that an “underwriter presented with a policy application, change or renewal should have the tools that enable him to know everything about the customer that is in the system: claims data, billing data, notes, documentation sent and received, other coverages held and all information for them.”

The EY 2017 Digital Underwriter Survey underscores the need to blend professional skill with comprehensive access to client data. “As highlighted by the survey results, underwriting stands to benefit greatly from this digital transformation, especially when digital enablement is combined with the modernization of the knowledge, skill set and roles of underwriting professionals.” When it comes to commercial lines, attempts at total automation may fail to strike the right balance between human insight and analytical decision making.

Technology for the Modern Underwriter

If the future of commercial underwriters is not being replaced by algorithms, but instead evolving into data scientists marrying insight with analytics, then the choice of technology will greatly affect that path. As we previously touched on in Growing Your Business Through Analytics — Getting Started, becoming a data-driven carrier organization begins with several manageable steps.

Given the necessity of providing digital underwriters with access to truly comprehensive data, data integration is a critical component. Origami Risk offers carriers a way to provide a single source, 360-degree view of customer information including any necessary third party data. This enables the data-centric environment that supports the emergence of the digital underwriter.

The exact nature of digital underwriting remains uncertain. It is clear, however, that combining the power of analytics with the professional insight of underwriters will be key to delivering agents and brokers the level of service they demand.