3 Tips to Tackle Roadblocks to Commercial Lines Underwriting Digital Transformation

Digital Transformation - July 28 2021

One of the most vexing challenges insurance executives face today is how to shepherd their organization and teams through change. With customer expectations on the rise, insurers, brokers, agencies, and MGAs are being forced to adapt to new market dynamics and embrace change across the entire value chain. But change is daunting, not everyone appreciates change, and often there is resistance to change. So, how can insurance executives eliminate the blockers to change and convince individuals across the organization to embrace digital transformation?

Adoption of advanced technology, such as AI, predictive analytics, and machine learning, is anticipated to bring major opportunities for commercial insurers, according to Valuates Reports, which noted a 2018 study found that companies using technologies, such as blockchain and AI, improved their loss ratios by 3%-9%.

As the industry embarks to make a smarter use of data in commercial lines underwriting and leverage AI-powered solutions as a tool for human knowledge workers, rather than a replacement, these large-scale digital transformations shake up traditional processes, systems, and people. While digitizing the underwriting process from submission clearance and registration to prioritization enables insurers to expand their underwriting capacity, pinpoint the best business to write faster, and accelerate the commercial lines placement process, successful digital transformations hinge on the organization’s ability to embrace change.

“I think about large-scale digital transformation as an investment and a journey. When you say large-scale digital transformation, that generally doesn't happen in 30-day, or even 90-day increments. One of the things that I think each company should do is think about the, I call it the three horizons, the now, the next, and the future,” explained Tony Fenton, Vice President, Commercial Lines Underwriting and Product at Nationwide while discussing the Future of Commercial Lines Underwriting. “Digital transformation is one of those next and future moments for a company. It's really important to have a solid digital foundation and to really go through a transformational effort, you have to really think in those horizons, where you have interactions, whether its customers, agents, in that digital transformation space. I call that working on the now, creating the right agency and customer experience.”

When it comes to digitally transforming commercial lines underwriting, the traditional structures that insurance companies have around how and where decisions are made, approaches to building up intellectual assets needed to support technological changes and the methodology changes that AI or Machine Learning approaches bring to the organization require a lot of work. It’s not just a project, it’s a holistic change to how underwriting is done in the future. “The expectations that people have about what the technology will solve and what you need to get ready for that technology to actually implement it is all over the board,” explained Art Borden, Vice President, Underwriting, CNA Insurance during our recent webinar titled 2021 Commercial Lines Underwriting Priorities and Trends. “So, with that in mind, there’s a tremendous amount of conversation that needs to happen. It’ll only happen if you continue to advance the education and getting the right people in the room and continually hammering that message.”

A survey conducted by Strategy Meets Action (SMA) and Boundless Consulting noted that 80% of industry experts expect underwriting to be significantly different in the next five years, and 94% expect it to be significantly different by the end of the next decade. 

According to Megan Bock Zarnoch, CEO and Founder, Boundless Consulting, "The secret for success is not dependent on which firm can invest the most in new technology. It is about who will turn that paradigm on its head and invest intentionally in culture, letting business lead the strategy, and thus fueling innovative ideas and exponential success across all metrics." As Megan points out the real key is prioritization and including people and culture in the transformation journey. Organizations really need to have a framework and work backwards, so that you can create a strategic plan that then moves forward to deliver that vision.

Nationwide’s Fenton also emphasizes the importance of culture and notes that setting the organization’s North Star to align with operational strategies is a key component of change management. For many the North Star defines the company’s definition of its purpose, its products, and its customers, giving clarity to c-level executives and key stakeholders toward their goals and the company’s future growth.

According to a Forbes Insights and PMI survey of more than 500 executives, 84% of those surveyed by Forbes Insights view CEOs as champions of change, the driving force behind a culture that supports organizational agility and embraces new technologies. C-level technology executives also can play a role in digital transformation success: Eight in 10 respondents credit COOs and CTOs for recognizing the importance of the role of change management in disruption.

Author of The Change Maker’s Playbook: How to Seek, Seed and Scale Innovation in Any Company, Amy Radin also believes that transformation starts with cultural transformation, and that transformation begins with the C-Suite. That definition of purpose, and structuring innovation with a distinct emphasis on culture is critical to driving forward change within an organization. She also agrees that the North Star provides clarity for everyone on the transformation journey.

1. Explain the “Why”

Communicating change is one of the four core principles of successful change management. The first phase of communication is driving awareness of the need for the change and communicating the desired goals or objectives for the change. Painting the picture of the “why” and connecting it to the overall strategy is paramount. Communication is key to removing the roadblocks to digital transformation, achieving success, and driving user adoption. Underwriters and underwriting teams need to understand the reason “why” digitally transforming the underwriting process or components of the process like clearance and registration, or submission triage or submission prioritization is important to the organization. They also need to be included along the automation path as the organization defines what is digital underwriting and the key metrics defining underwriting excellence.

“Management teams need to talk about it, frame it up, in terms of how AI is going to enhance, how it will help the underwriter spend all their time building relationships, creating value for customers, proactively solving problems, and eliminate some of the busy work or the less value-add work they have been doing in the background,” explains Megan Bock Zarnoch, Founder and CEO, Boundless Consulting Group.

2. Think Outside the Box

During our recent webinar titled 2021 Commercial Lines Underwriting Priorities and Trends, Nathan Root, Head of Product Management in Technical Underwriting, Zurich North America explained how Zurich North America is not just thinking about digital, but they are thinking about developing an organization that’s more adept at ushering in change. He went on to explain how Zurich North America launched an apprenticeship program that entails individuals working three days a week at Zurich and attending school two days a week – and it doesn’t require a college degree. The program is creating pathways into Zurich that didn’t exist before. Individuals who join the apprenticeship program, then join the organization and in ten years from now, they will be part of the decision making and leadership team. This is an example of visionary leadership to creating a more resilient group and establishing a future vision for change.

Organizations like Nationwide have invested over $160 million in terms in an initiative dubbed “Future of Work” to upskill and reskill talent. Enabling underwriters, we well as other professionals within the organization to participate in very targeted training courses to customize their learning experience throughout the year. Digital technology micro-learning opportunities are available around specific area of interest such as advanced analytics.

3. Take a User-Centric Design Approach

Often, our systems are dictating our processes. It’s important to distinguish process from system. It’s also important to consider user adoption and the intrinsic knowledge that users have invested in learning existing systems and processes. Taking a user-centric design approach by including users in the conversation, will help eliminate the ‘rejection’ of new ideas and reduce the fear of job redundancy.

“It does change how people do their jobs, particularly when you're looking at potentially automating 80% of what someone had done previously. People they get nervous about that. That's not something that makes people comfortable.” says Nathan Root, Head of Product Management in Technical Underwriting, Zurich North America. “The reality is that there's plenty of work that is still out there. So how do you make that to be convincing, because that's the reality, and get past some of that fear component is really important.”

I think it's important to take a user-centered design approach, really get the feedback from the underwriter team themselves, understand how they're using the current system, certainly what some of the limitations are. But if you design it in a box or you just acquire a system without any feedback from those underwriters that are actually going to be interfacing in the system all day, every day, you can certainly think that you're setting yourself up for success only to define failure, because the underwriters that are using it day in, day out really don't like it, don't take to it.” says Rob Galbraith, author of The End of Insurance As We Know It. “So, it’s important to have a back and forth conversation.”

The Path to Effective Underwriting Change Management

Change is never easy as humans we are creatures of habit. We are comfortable with our routines and with what we know. Individuals tend to rally against change when it’s not inclusive. As Ron Glozman, CEO and Founder, Chisel AI suggests, “One of the most important ways to get teams to rally for change is to involve them in the dialogue because machine learning on itself is not going to solve the problem.”

High-performing organizations are often defined by their ability to embrace a culture that supports continual transformation. By approaching commercial lines underwriting digital transformation with a disciplined approach, and masterminding it effectively, insurers can use disruptive technology to leapfrog the competition.

Watch the on-demand webinar Commercial Lines Underwriting Priorities for 2021 & Beyond to hear more expert insights and guidance from CNA, Zurich North America, and Rob Galbraith on the evolution of digital underwriting in commercial insurance.

CL UW Webinar OnDemand

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