Digital Transformation - June 9 2021
The digitization of commercial lines underwriting is accelerating as Chief Underwriting Officers, and business leaders seek to significantly reduce the amount of time underwriting staff are spending on manual administrative tasks. McKinsey estimates front-line underwriters are spending between 30% and 40% of their time on manual processes.
Much like other industries, commercial insurance is being impacted by the “now” generation who expect comprehensive choices, efficiency, flexibility and fast responses. Combined with the impact of COVID-19 and the hardening market, commercial insurers are feeling the pressure to digitize and streamline underwriting operations to gain operational efficiencies, optimize risk assessment, accelerate distribution partner responses, and remain competitive.
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“We need to evolve,” states Rob Galbraith, bestselling author of The End of Insurance As We know It. “We need to have new products, mass customization. Customers are expecting this in all manner of other industries, and so they're coming to expect that in the insurance industry as well, and so there's a need to change the way that we underwrite when we're looking to innovate on the product side.”
Digital evolution and attaining commercial lines underwriting excellence requires a relentless focus. When looking to improve underwriting performance, it’s crucial to recognize that underwriting is more than risk selection and pricing. It requires a broad set of competences including hard and soft skills, qualitative judgment, and rigorous portfolio management. As technologies such as artificial intelligence, machine learning, natural language processing, and advanced analytics, enable underwriters to have greater access to new data sources and underwriting becomes increasingly more data driven insurers need to optimize their existing business to be in a position to spot new opportunities.Today, it’s critical to balance the underwriting metrics traditionally monitored and tracked with the heightening market expectations to deliver an exceptional digital customer experience. Insurers need to juggle how to make the life of an underwriter more efficient and how to make it a better experience for producers, distributors and policyholders.
Automated underwriting holds the promise of streamlined process flow, expanded underwriting capacity, reduction in underwriting leakage, improved staff productivity, enhanced distributor communications, more consistent underwriting decisions, and faster submission throughput – all leading to a more profitable book of business.
During our recent webinar titled 2021 Commercial Lines Underwriting Priorities and Trends, Arthur Borden, Vice President, Product Services, CNA outlined the concept of decision velocity as a key metric for defining underwriting excellence. He explained the concept as an underwriting decision that has credibility, stands the test of time, and delivers the insured a positive result that meets their expectation. Decision velocity is focused on giving underwriting teams and communities with quick, validated access to the information they need for risk assessment and faster customer responses. Under the decision velocity framework, underwriters make decisions that they like, that they think have credibility and will stand the test of time, and that actually gives the insured the result they were looking for, aligns to their expectations, and makes the insurer and insured co-equal contracting partners. It’s really about capitalizing on operational efficiencies while delivering a better customer experience. As risks continue to intensify, insurers need to consider implementing the right decision support infrastructure that drives velocity while empowering underwriters with fast access to disparate information sources for complex risk assessment making it possible for underwriters to solve customer issues quickly and efficiently.
Traditional metrics such as the underwriting expense ratio remains a critical underwriting performance metric, however, given current market expectations, application processing time or speed of response is at the forefront of performance indicators. In the past, there was little focus on how long it took to process a submission or application or the underwriting expense portion, but today processing time is mission critical and needs to be balanced with the overall experience being delivered to distributors and policyholders. Insurers need to look through the lens of “could we do this better?”
As Andreessen Horowitz, a renowned leader in technology, noted in their blog, “2020 has shown us that every company – no matter their industry or size or age has to become a technology company to survive.”
So, how do insurance carriers adopt a technology mindset to automate and streamline underwriting processes, give underwriters the information they need for risk assessment, improve the customer experience, shorten application processing times from weeks to hours, and lower their underwriting expense ratio?
Watch this on-demand webinar Commercial Lines Underwriting Priorities for 2021 & Beyond to hear more insights from CNA, Zurich North America and Rob Galbraith on defining underwriting excellence, digital underwriting, and delivering an exceptional customer experience.
