Show me the money: Innovation in underwriting
Long-term projects without quick wins have made underwriting teams sceptical of the promises of technology. It’s time for a different approach, says Ben Huckel (pictured), co-founder & chief operating officer of Send and a panel speaker at our Innovation conference. We spoke to him for a pre-conference Q&A.
As an industry, insurance is often characterised as slow to adopt new technology and innovations. Is that fair when it comes to underwriting?
I don’t think re/insurers have been shy about trying new things. We’ve seen a lot of enthusiasm from underwriters and very innovative organisations looking to go digital first. But there is a level of cynicism with the results achieved. That naturally leads to organisations becoming slightly more hesitant about engaging, particularly in multi-year technology programmes, because they don’t see any business benefit until the end. By that time, the world has moved on.
The pre-bind space has also been relatively underinvested over the years. Insurers typically invested a lot of money in the post-bind area. They’d implement a policy admin system and then hit it with progressively larger hammers to try and get it to do some of the things they struggle with in the underwriting process. Often, solutions have been cobbled together rather than thinking about it strategically.
What’s driving the need for innovation? How do traditional systems fall short?
Traditionally, there are usually lots of different systems, and Excel is the underpinning technology in many processes. Underwriters are rekeying lots of information, which is prone to error, and you have entire teams combing through the data and having to augment it or cleanse it.
That also leads to a level of corporate amnesia. When it comes to renewal time, they struggle to identify how decisions were made, and they’ve forgotten why they gave that 10% discount, for example. There’s almost an archaeological exercise to try to uncover the rationale. It also means underwriters aren’t actually underwriting; instead, they spend a lot of time tracking down information or processing things.
It’s not just about being efficient. If you don’t have a single, reliable view of the customer, brokers or the agencies you deal with, it’s difficult to understand their performance, the amount of work you’re leaving on the table, and whether it’s work you have a chance of winning. They need this technology and data capabilities to give them a commercial advantage – and I think that’s what’s changed. When we first came to market, we’d often have insurers saying they probably couldn’t afford an underwriting workbench. Now they’re saying they can’t afford not to have one.
What’s wrong with multi-year programmes?
Nothing, but you need to be getting a business benefit out of it as you go because you can’t afford to wait until the end. If you’re engaged in a multi-year programme where you don’t have a proof point of that technology or the capability until year two or three, you’ve got it wrong.
First, that’s because it’s not always going to be clear what you need to achieve at the start. You’ve got a clear view of what the first two or three months might be, but it becomes more difficult as it gets to six, nine, 12 months or longer. It’s also because the business benefits need to drive the technology. You should start with the areas where you can see the benefit – identifying new opportunities, streamlining existing operations, integrating with new services or pulling new datasets and capability into the underwriting process.
And technology is never the answer in isolation. To maximise benefits, you will typically want to evolve your business process too. Doing that might allow you to adopt new capabilities or technologies, but the technology should be the enabler for that change rather than driving it. It is part of the answer, but the driver for the change has to come from the business.
What will those drivers look like?
It will depend on the business. There’s so much capability that you can gain from the adoption of something like an underwriting workbench. We’ve had some interest in modernising their rating systems because they want to change their models with dynamic factors to respond to market conditions. Others specifically want to focus on the compliance capabilities of the platform because it allows them to sleep at night. All insurers need to tell a good story on sanctions checks and be able to document and provide evidence that they’ve followed their procedures and policies.
And because their requirements change over time, you want to be able to augment different systems around the underwriting workbench and for it to enable that change to happen. You want something flexible, so you can go back and change it. So when a better address cleansing service comes out, for example, you can just tear out what you have and put the new one in with minimal fuss and effort.
Ben Huckel will be on the panel discussing “Why tech alone isn’t the answer – how to align innovation with business impact” at Underwriting Innovation Europe on June 6-7.
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