Underwriting Of The Future

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    As insurers have been moving towards greater digitisation, underwriting has been a critical focus area. They have been upgrading their underwriting capabilities with advanced technology due to a need for efficiency and evolving customer expectations. For example, at the start of this year, Lloyd’s began to put into action Blueprint Two – the second phase of their ‘Future at Lloyd’s strategy – in a bid to make their insurance market the most advanced in the world.

    This is to remain competitive as the customers’ world is changing, becoming more digital via global supply chains. Not only that, underwriters are being asked to bring more science to their artistry, and the nature of risk itself is changing, leading them to adapt so they can stay relevant.

    But, firstly, what is underwriting?

    For those who don’t know, underwriting is ‘the process through which an individual or institution takes on financial risk for a fee.’ It typically involves loans, insurance or investments. The term originates from having each risk-taker write their name under the total amount of risk they were willing to accept for a specified premium. Research is always conducted, and the degree of risk each individual brings is assessed before assuming it.

    There are three types of underwriting: loans, insurance, and securities.

    In this case, insurance underwriting focuses mainly on the potential policyholder. During 2014, changes were made under the Affordable Care Act for insurers in offering coverage. They are now unable to deny or impose any limitations on pre-existing conditions whatsoever.

    Life insurance underwriting, for instance, assesses age, health, lifestyle, occupation and other risks, which are all determined by the underwriter. It can result in approval or outright rejection. The underwriter evaluates loans to determine whether a borrower will payback. For insurance, underwriters will assess the policyholder’s health and spread the potential risk, among others.

    With advancements in technology, the process has shortened to a matter of days or even hours.

    So, what’s next for underwriting?

    The future of underwriting is somewhat bright. Through interviews with top chief underwriting officers and business leaders of several large life and property-casualty insurers, three trends have ultimately been identified regarding underwriting modernisation as a whole.

    The first sees underwriters being challenged to move from hindsight – where decisions are evaluated afterwards – to foresight – where portfolios are actively monitored before and prior.

    Secondly, underwriters will have to become data pioneers while also using their vast experience and decision-making to manage portfolios, adapt to fluctuating market conditions, maintain relationships, and keep pricing realistic in such a highly competitive, growing market.

    The third sees underwriters adapting to the evolution of risk to remain relevant, such transformation being a long, arduous process requiring a significant shift in their overall roles.

    All of this is in aid of shifting the priorities of underwriters, allowing them to focus on becoming more efficient while improving accuracy and boosting customer satisfaction as a result. Underwriters also focus on automating where possible and using alternative data, as well as artificial intelligence, to help them make this a reality. The goal is and never will be to make them obsolete as they build proper working relationships with insurers and brokers. However, in life insurance, historical health records will continue to be essential, but predictive data tracking can ensure a more comprehensive assessment. So there is a better indication of growth here.

    The future of underwriting will benefit from advanced modelling tools, and therefore cutting edge pricing. Newer, more in-depth platforms can process large data sets, which can then be integrated into an insurer’s data ecosystem to provide a view of every risk possible. Then, historical loss records can be automatically loaded into analytical models. As a result, underwriters will review and adjust, adding value and decision making instead of time-consuming data entry.

    Lastly, it is worth mentioning that underwriters do not work alone. Third parties will often share their data sets for risk assessment. This streamlines the entire process, making life a lot easier for everyone involved. Data sets can then be integrated, such as specialist geo-coding services, financial data for companies, or industry data, whatever the situation might be.

    Collaboration is key to the insurance underwriting process. The next generations of insurers and underwriters will be able to work better together due to modern technology, further highlighting the necessity of technology and data integration. And, with it, underwriting will for sure have a positive future over the next couple of years.

    And how can we assist you?

    Victis Corp is designed to give you a helping hand when it comes to growing your business. Our senior management team has a wealth of experience spanning over one hundred years of industry knowledge. We also have in-depth administrative tools to help your business monitor all information relating to product reliability. To be in with utilising all of these fantastic assets, then call 0844 967 2600 or email info@victis-corp.com today! We look forward to speaking with you.

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