There are a few areas in which digital capabilities are helping commercial carriers modernize. For starters, there is considerable innovation in claims. As personal lines started doing over a decade ago, commercial carriers are now investing in capabilities that make it easier to manage a claim online, which expedites the process and increases customer satisfaction and retention. In addition, increasingly comprehensive and comprehensible third-party and in-house data is simplifying online research; understanding of complex products, individual customer and customer segment needs; and the quote and sales process.

Because of the importance of the user experience and the need to more efficiently and profitably serve the market, the commercial operating model will continue to change especially at the front end. Investments in digital capabilities will continue apace and the direct channel will slowly grow in importance. However, because a business' insurance needs are often bespoke and require a human touch, independent agents will almost certainly continue to be the primary distribution channel for commercial into the foreseeable future.

Digitizing underwriting

Artificial intelligence (AI) is playing a major role in changing underwriting. As a case in point, most personal auto policies are now priced automatically. Digitization has simplified the underwriting process to the point insurers can avoid asking too many questions of the customer, who just wants a quote. There's enough internal and external data to automate most of the process.

However, in segments of the market like commercial, an underwriter — a human — often has to look at the risk that a carrier underwrites. For at least the time being, human judgment is still important even if models increasingly inform decisions. Accordingly, digitization — in this case, AI — is more about enabling humans to quickly and effectively collect the information they need to adequately assess and underwrite risk, and defining the technologically augmented process they need to follow to underwrite that risk. This is resulting in enhanced underwriting discipline that is defined by an increasingly consistent approach to underwriting risks and greater understanding of and control over underwriting decisions.