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article imageThe future direction of underwriting means more digital data

By Tim Sandle     Mar 7, 2021 in Business
Like many professions, underwriting has been disrupted by the pandemic. Underwriting remains of economic importance, evaluating the future performance of property. Yet to meet the new challenges, the profession needs to turn to digital data.
A recent report from the Deloitte Center for Financial Services, titled the “The rise of the exponential underwriter,” explores how insurers can leverage a convergence of data, technology, and human capital to transform underwriting in the industry and multiply the value they bring to the profession.
The report is based around a survey of 19 chief underwriting officers (CUOs) or equivalent business leaders from leading life and property-casualty insurers. Supporting data was drawn from over 25,000 job listings. The aim of the survey was to determine the new roles underwriters will likely need to assume to optimize the use of emerging technologies and data sources, as well as the skill sets and capabilities they will require to meet rising expectations.
The survey insights show a shift within the profession, most notably how underwriters are being challenged to move from hindsight to foresight. This means that instead of looking backwards to make underwriting decisions, underwriters are more commonly seeking to move toward actively monitoring portfolios to understand the impacts of new risks added to their books of business in real time. In terms of drivers, the pandemic and cybersecurity are two areas that have appear to underscored the importance of this for commercial lines.
In keeping with this theme, the survey report also emphasizes the dangers of not looking ahead. This is because the unusual economic circumstances lead to the relevance of historical data diminishing over time. Hence, past data may no longer accurately predict future trends and exposures. The consequences of this may result in poor risk selection, ambiguous coverage language, and inaccurate pricing.
Another key trend drawn from the survey is how underwriters are being asked to bring more science to the activity of underwriting. This means utilizing data more fully and drawing more meaningful inferences from it. In essence, this means tapping into the proliferation of data that the sector generates. In a sense, underwriters need to be both data pioneers and applying digital technology in addition to providing the human judgment inherent to their roles.
To meet this challenge, a data science paradigm is essential. There are signs from the survey that more underwriters are using a science-based approach. Examples where this is being applied includes driving sales leads, optimizing portfolios and managing risk.
Despite the importance of handling digital data, the survey finds that most underwriters remains some way away from becoming technology trailblazers or data pioneers. To redress this, the profession needs to collaborate more closely with IT teams in order to refine underwriting and make decisions more defensible against challenges from distributors, clients and regulators.
There are also signs that the nature of risk itself is changing. This means underwriters will need to adapt to the evolution of risk to remain relevant and stay competitive. This is especially important as different coverage types continue to converge. As an example, with workers’ compensation converging with homeowners’ coverage boundaries given the growth of the remote work environment.
More about underwriting, digital transformation, Insurance, Data
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