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Digital Transformation in Underwriting

May 25, 2021

With the advent of technology, underwriters can converge on fundamental business activities, including risk-score based decision-making and building enduring relationships with brokers. Since commercial insurance is undergoing a comprehensive transformation across all divisions, insurers must develop better underwriting results and enhance their profitability and GWP.

Insurers need to sustain a competitive advantage in this digital age by evaluating their underwriting holistically and integrating with available technology solutions. In this blog, we shall delve into the barriers of underwriting modernization and outline probable steps to expedite this transformation process.

Barriers to Customer Onboarding
1. Limited Traction

The transformation process of many companies has been restricted, mainly due to insurers taking a more cautious, incremental approach. These firms often opt for minimal improvements to their risk frameworks and processes rather than analyzing the potential of a more modern approach to underwriting. In addition, consumers who choose this accelerated underwriting process often don’t qualify for the preferred rates that are accessible to those who undergo full medical underwriting.

These malleable options are available only to a relatively restricted set of customers who fit the age and face-value requirements. Given the impending changes brought on by COVID-19, insurers can no longer afford to be resistant to change and cautious.

2. Constraints of Legacy Technology

Major insurance companies and technology vendors have developed distinct automated underwriting platforms in which the underwriting manual is part of the pre-set rules. These platforms usually incorporate a workbench to maintain workflow and application programming interfaces to consolidate third-party data.

However, such platforms have only partially helped insurers build a truly automated process. Insurers continue to face archaic technology because modernization requires either using new vendors to replace current technology or implementing bypasses. Instead of focusing on the perfect technology solution, employing an agile approach helps companies find ways to progress. By replacing technology or using bypasses, insurers must adopt a mindset that accepts a minimum viable product as a way forward.

3. Risks of an Unsuccessful Transformation

The return on investment for the underwriting modernization process is not instantly apparent. Even if a company takes a flexible approach and makes rapid progress, the value may not be promptly obvious for several years. There may also be unintended consequences: mortality experience, especially when based on less data or new origins of information, could decline.

Prosperous companies acknowledge such risks and have come to the understanding that if they fail to modernize, they will be left behind. Thriving companies also have a prudent acceptance of the possible atrophy of results—with the conviction that they will calibrate new models that eventually will perform in tandem with, if not better than, pre-existing models.

Strategies for a Successful Modernization Process
1. Creating a Cross-Functional Team

A dedicated, interdisciplinary team is required to deliver a successful transformation program. A successful technological transformation needs the coordination of concerned departments and multiple roles such as underwriting, actuarial, product development and distribution. The team needs to be liable for all program parameters, and share joint accountability of program developments.

2. Commitment to Transformation

Even with a rapid pace, an underwriting-driven transformation can take most insurers multiple years to develop. Sustaining momentum and resourcing warrants true conviction from the company’s executives. Treating the project as a pilot program will not provide the requisite conditions for true innovation. With the help of robust conviction, marked aspirations, and specific communication from the apex, the program is bound to get traction.

3. Expediting Pace

Longer-term initiatives such as legacy system migration should be broken down to fit into compact release cycles. Small features should be delivered punctually to the market along with shortening the product-development cycle. The project cycle should not be kept linear; it should include several streamlined feedback loops to keep processes moving simultaneously.

This process will also help to share learnings with diverse operative teams. Successful project execution necessitates a pace of change that is decidedly much more agile than the typical pace of large-scale projects at most insurance companies.

Conclusion

Modernized underwriting is bound to set the stage for future industrial innovation. It associates with the improvement of collection techniques, aided by new technology for garnering and analyzing biometric data. Insurance product sales specifically will displace from low-engagement, one-time transactions to a continuous relationship between the customer and the insurance agency. This commitment will be established by continuous underwriting and a more prominent focus on health and wellness. Supported by these reforms, streamlined underwriting is the first foundational step, bringing about the succinct reinvention that the insurance industry needs.

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