Why data and technology strengthen underwriters but will not replace them

​Data-driven decision making is the new frontier for insurers, and in today’s tumultuous economic and political atmosphere, it is vital for carriers to make use of the granular insights extracted from various data channels during the underwriting process. The unstable global economy demands that insurers rapidly respond to shifting market needs and assess risk regularly and with real-time data.

The digitisation of insurance processes has accelerated during these uncertain times, according to Thomas Anderson, director of sales, US, for commercial insurance and reinsurance software solutions provider AdvantageGo. Here, he discusses why data and automation are so important for boosting underwriting performance, but also outlines why the human touch will always be needed.

How has underwriting changed as a result of technology, data and automation?
When you look at insurers today, the speed of technological advancement is growing at an incredible pace, and insurers are under intense pressure to write new business, settle claims and underwrite profitably while in a worldwide pandemic crisis. Technology is enabling them to start looking at speed of service, speed of quote and data ingestion. Technology is alleviating a lot of mundane tasks so that underwriters can focus on the data they need in order to make the best underwriting decisions for their companies.

What is the key to driving efficiencies and growth in this data-rich world?
The key is having a data centric strategy in the pre-bind phase that connects all the dots. Telematics, IoT, predictive analytics, AI, machine learning – all these technologies are creating a need for insurers to go to market and find best of breed solutions for their pre-bind underwriting processes. You need to ingest all of that data, and the systems need to handle that data quickly and allow underwriters to shift, to make changes and to respond to the market changes that are constantly happening in the digital age. They need to be making better decisions, and also - from a customer perspective – they need to be providing the right coverages, while cross selling on those coverages to better protect their client. If you look at the sheer amount of data that is coming into these underwriters’ desks every single day, without a best of breed solution on the pre-bind side from an underwriting perspective, they will be completely overwhelmed with data and that will make the decision making process cloudy. Without a data centric strategy, you are going to fall behind and start seeing errors in your underwriting process.

Does the insurance industry have confidence in the technology that underpins its underwriting decision making – now and in the future?
The COVID-19 pandemic has ignited insurers’ eagerness to embrace technology. Post COVID-19, for example, technology is needed to ensure underwriters are not stepping on each other’s toes: they need to know when they are working on the same risk, and to be able to collaborate remotely on that risk.

Pre-COVID-19, when companies found software or technology gaps, their first thought was to build their own solution. Nowadays, companies don’t have twelve to 24 months to build up a solution, so they are adopting the technologies in the market that allow them to fix that gap in months rather than years. Underwriters who previously dealt with a multitude of disparate systems have now seen the light when it comes to being able to unite those disparate solutions into a single source of the truth. They are seeing data driven decisions and analytics that give them the insights into those risks and the underwriting process and allow them to process business more effectively. You are seeing massive insurtech investment increases year over year.

Are companies investing enough to make a genuinely forceful change?
It depends on who in the C-suite you ask.

The pandemic has forced insurers to audit their entire technological ecosystem and understand where they need to invest more money to provide the solutions for their day to day operations to be more efficient and profitable and to keep up with their competitors.

It’s created an environment where you must embrace data driven decision making – it is not a “nice to have” anymore, it is a must. We don’t know what is coming tomorrow - the pandemic has provided a very real-world example of that. The tumultuous economic and political atmosphere means it’s inexcusable for carriers not to rely on all the resources at their fingertips and allow their underwriters to provide feedback to the C-suite, making rapid changes and responding to market needs.

When it comes to investment within companies, I would say they were investing at a decent pace before COVID-19; now they are beginning to invest more due to the environment that we live in today.

Could AI ever replace underwriters?
There is an underling nervous feeling that software, technology, AI, big data and machine learning are inevitably going to push the underwriters out of the door. My belief is that it couldn’t be further from the truth. AI enhances and supports an underwriter’s tacit knowledge and augments the underwriting process so underwriters can capitalise on all data points. Underwriters are essential when it comes to the overarching risk management of a portfolio in an insurer, and they can’t be replaced with technology. No matter how awesome the AI, you will need the experience and knowledge of an underwriter to review all of that data that our software might have brought together for you. There are certain types of decision – for example, a decision based on the fact you’ve had a customer for 30 years and know them well – which can only come from an underwriter. Big data, machine learning - all that is going to do is provide an avenue for underwriters to ensure they are looking at the entire exposure completely, and ultimately the underwriter of today is going to be able to handle twice as much business as an underwriter in the 1980s.