The Future of Underwriting: Transforming Commercial Insurance with Technology

The Future of Underwriting: Transforming Commercial Insurance with Technology

In Uncategorized by Roger Lewis

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The commercial insurance industry is at an inflection point due to several economic uncertainties like inflation, sluggish rate growth, competition for distribution partner preferences and more. These factors, along with increasing natural catastrophes and the growing threat of cyber risks are challenging insurers.

It is now necessary that carriers examine and transform their product portfolio strategies and pricing sophistication approaches and focus on customer experience. At the heart of this expansive industry transformation lies the pivotal function of underwriting. Market pressures drive the need for a more modernised underwriting process.

To enhance underwriting capabilities, commercial insurance carriers can utilise advanced augmented intelligence, modern analytics, pre-filling information, process automation and digital capabilities for a superior agent and customer experience. (Disclosure: My company assists with these technologies, as do others.)

Demystifying Underwriting Complexity

Underwriting, at its core, is a flow across five key events.

1. Business intake.

2. Triage and segmentation.

3. Risk assessment.

4. Decision-making based on strict underwriting guidelines.

5. Policy issuance.

Many carriers currently employ disjointed information sources and manual processes for reviewing and triaging new business applications, utilising complex underwriting rules. This results in time-consuming manual work.

A holistic underwriting modernisation effort should balance enterprise-level solutions with those targeting specific lines of business, critically reviewing the latter to avoid unnecessary investments in processes that technology can eliminate.

Based on collaboration with large commercial insurance carriers and agencies, I’ve identified some trends and offer the following steps to improve underwriting and modernise carriers’ business intake and decision-making.

Solutions For Underwriting Modernisation

1. Automating Ingestion And Submission

Agencies often streamline commercial business applications by using ISO and Accord forms for manual submission via email. Recent AI enhancements can help improve accuracy and cost-effectiveness through intelligent document identification, electronic ingestion and metadata through advanced form processing.

Digital-first carriers can invest in intuitive commercial agent portals, facilitating automated quote and bind processes with advanced pre-fill capabilities, enhanced risk-based rules management and AI-enabled underwriting workbench solutions.

Many carriers enhance underwriting decisions by incorporating third-party and pre-filled data, utilising solutions like machine vision, satellite imagery, drone feeds, windspeed data and resonance frequency data.

There are some strategic opportunities to unlock value throughout the underwriting value chain.

• Use AI to extract insights from unstructured documents and leverage AI-powered processes for submission intake, risk appetite and scoring. Ingest-tech offers a strong value proposition, as AI can enhance the ability to extract insights from unstructured documents, automate loss-run indigestion and enable machine vision technologies to improve image-based estimation.

• Increase the use of strategic data pre-fill and proactively collaborate with technology companies to leverage property, weather and climate analytics for hazard-prone risks. Since the market is awash with AI-powered solutions, carriers must be pragmatic in choosing the right solution through careful consideration of business value, technical fitness and synergistic thinking.

• Advance the use of generative AI and large language models to integrate structured data (third-party and internal database) and unstructured data (pictures, videos, submitted documents). Revolutionise internal knowledge management systems and expedite information synthesis and underwriting examination with cost-effective AI models.

2. Underwriting Workbench Implementation

Over the years, the underwriting workbench has progressively evolved from paper-driven to workflow-driven to new-age policy admin systems and SaaS-based and AI-enabled workbench systems.

Carriers and MGAs must select from a host of options when it comes to deciding on an underwriting workbench solution.

1. Configure existing underwriting capabilities in the carrier’s current policy admin systems for quick but limited returns on automation.

2. Augment existing policy management systems with tactical and narrow automation tools for ingestion, workflow and rules evaluation.

3. Implement a stand-alone underwriting workbench solution with ingestion, workflow, case management, rules evaluation and process automation.

Commercial insurance carriers must strategically assess automation options, incorporating algorithmic models and AI to augment underwriting resources. Regardless of choices made by carriers and MGAs, paying attention to the following criteria for success is crucial.

• Strong case management capabilities to improve automated routing and exception handling.

• Integration with modern AI models for risk and fraud management.

• Real-time visibility into underwriting queues and workloads, including dynamic work re-assignment.

• Comprehensive risk operations analysis based on underwriting guidelines powered by large language models.

• Simplification of new product onboarding and pricing flexibility.

• Multi-source hazard data integration into underwriting decision-making.

• Pricing sophistication to drive AI-powered right price for the right risk.

Overcoming Challenges

Leveraging technologies like AI, machine vision, deep learning models and hyper-automation comes with challenges. One of the major hurdles is data quality. The complex algorithms powering these technologies need clean and structured data, which many carriers still lack. The use of inaccurate, biased data can potentially lead to harmful results for policyholders and carriers.

Furthermore, interpretability becomes a concern as AI models become more sophisticated. Underwriters need to understand how AI arrived at its conclusion, especially in high-stakes situations. Lack of transparency can hinder trust and raise ethical concerns.

On the other hand, change management can be tricky since integrating AI requires revamping workflows and upskilling human underwriters. To overcome these challenges, insurers must adopt a multifaceted approach. Start by enhancing data quality through rigorous data governance, cleansing tools and collaboration for standardised, high-quality data. To address the interpretability challenge, explainable AI techniques and thorough documentation of decision processes are essential.

Change management will require comprehensive training programs for underwriters coupled with effective communication and engagement to overcome resistance. Establishing transparency measures and collaboration with regulators are crucial for addressing ethical considerations and building trust.

The Path Forward

I recommend insurance carriers prioritise underwriting modernisation for measured growth and efficient scaling. While many incorporate AI and process automation into traditional underwriting, I think those innovating and implementing entirely new processes that leverage AI will experience more benefits than those applying new technologies to existing bottlenecks.

As AI modeling and process automation advancements enhance underwriting decision management, insurance carriers should assess current processes and technical gaps for strategic modernisation opportunities. Create a thorough process automation and augmented intelligence roadmap. This should also include calibration of build vs. buy options for the underwriting workbench, implementation of a flexible rules engine, a rating engine that offers pricing flexibility and capabilities for AI-enabled intelligent document ingestion.

Utilising AI and augmented intelligence in the cloud can empower a new generation of underwriters.

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