Technology is set to supercharge underwriting
There has never been a better time to be an insurance underwriter, as technology creates exciting opportunities to find answers to fast-changing risks, writes Penny Seach and Stephen Moss
Underwriters are curious by nature, always keen to get under the skin of risks and find solutions. Yet the pace of change is accelerating, and the risk landscape is becoming ever-more interconnected and complex. For underwriters, the changing risk landscape is a fascinating challenge, and one they can meet head on with the help of technology and data.
Enhancing the science
Underwriting is an art that is enhanced by science. Underwriters have always assessed qualitative risk factors (the art), supported by quantitative data (the science). But evolving technology that provides the ability to use large language models at scale and pace is every underwriters dream!
Today, underwriters have a much wider, and growing, range of information and tools at their fingertips, combining their own historical loss information and insights with third-party data and solutions, as well as the latest scientific research. Artificial intelligence in its many forms, along with wearable devices, geospatial data, sensors, and various connected devices will increasingly enable insurers to access, collate and analyse risk-relevant data in near real-time, efficiently and at speed.
Underwriters are moving from a model based primarily on hindsight to one that looks ahead. Insurers will be able to proactively respond to the rapidly changing risk landscape by using powerful analytics to drive insight, and to set and test various hypotheses to steer portfolios. These insights will inform underwriting strategies, portfolio balance and management and capital utilisation, as well as help drive solutions, innovation and delivery.
Humanise the complex, automate the mundane
Insurance has always been a people business, where relationships and face-to-face negotiations and collaboration are critical to understanding risks and crafting solutions. Understandably, some fear that technology would de-humanise insurance, or that artificial intelligence might make underwriters obsolete. In truth, technology presents an opportunity to support and enhance the human qualities and skills of underwriters, while at the same time increase efficiency.
The combination of human and machine is potentially very powerful. New tools will enable underwriters to ingest information at a scale and with a speed that has not been possible before. It will also remove more mundane tasks, such as administration, freeing up underwriters’ time to focus on underwriting, product innovation and client relationships. Rather than spend a day researching and understanding a risk, underwriters could have all the relevant information at their disposal, exactly when they need it.
The human element will remain an essential ingredient for successful underwriting, especially for large complex commercial risks. Machines do not provide leadership, they cannot empathise, and they are not particularly good communicators. Underwriters, however, can identify the most relevant data and ask the right questions. They also see the bigger picture and are able to use their qualitative assessment skills and judgement to make decisions. Key is ability to understand and respond to nuances as well as ensuring that no bias has been inadvertently introduced as part of the data-gathering and analytics process.
Deeper relationships and informed conversations
The increased use of data and technology in underwriting will bring many additional benefits to risk managers and insurance buyers, not least from more informed discussions. With better data and insights, insureds and their insurers can have much deeper relationships, with more enriched conversations and closer collaboration. With a shared understanding of risk, insurers, brokers and clients will be able to create optimal insurance structures and find innovative risk solutions.
Increased transparency should also drive collective efforts to reduce risk and build resilience. Insurers will be able to share more risk data and insights with customers, which can be used to inform risk management strategies and support internal discussions on risk and ways to manage, mitigate and transfer them. Equipped with better information, and more powerful tools, insurers will be able to develop more innovative products and services, including those aimed at mitigating and managing risk, such as risk engineering, loss prevention and consulting.
Digitalisation will increasingly drive improved levels of customer service, with more efficient automated processes, faster response times, and reduced administration. For example, alongside more standardised information requests, API (application programming interface) software will make it easier to share information between insurers and customers, as well as facilitate greater collaboration and communication.
Underwriting has always been an interesting and rewarding career. And with access to new tools and the challenge of new and emerging risks, the profession is about to get even more exciting. Technology will enable underwriters to satisfy their natural curiosity, explore risks and scenarios, and reach informed conclusions faster and more effectively.
Technology is seen as an opportunity, rather than a threat, by the insurance industry. In coming months and years, the application of technology will accelerate as insurers use a wider range of technology to enhance the art of underwriting and keep pace with the evolving risk landscape.
Contributed by Penny Seach, group chief underwriting officer, and Stephen Moss, global head of financial lines and cyber, Zurich Insurance