Insurers should upgrade to ‘exponential’ underwriters
Insurers are more likely to grow and thrive when they invest in modernizing their underwriting function with new data and technology.
While insurers continue to bolster underwriting with new data sources and technologies designed to make information easier to process, some may not be paying enough attention to the equally important human capital part of the transformation equation by upgrading underwriter capabilities and enhancing their roles to “exponential” levels, Deloitte’s latest research has revealed.
The Deloitte Center for Financial Services interviewed 20 chief underwriting officers and examined over 25,000 underwriter job postings from the past three years to determine where transformation efforts should be heading and how such innovations might be at risk of coming up short.
The end game should be to develop a new breed of “exponential” underwriters, not only by enhancing their efficiency with additional information and improved tech tools to make the data actionable but also by equipping them with advanced skill sets and empowering them to assume several more strategic personas.
Deloitte’s research paper, “The Rise of the Exponential Underwriter,“ drives home four key messages:
A confluence of alternative data and advanced technology is necessary to enable exponential underwriting capabilities. There was widespread recognition among those we interviewed that insurers need to accelerate underwriting transformation to remain competitive by both automating routine tasks as well as augmenting their teams with emerging technologies and alternative data sources.
For example, artificial intelligence can leverage data extraction and recognition from unstructured sources, such as free form text fields or visuals, to improve model input accuracy and help carriers make faster and more supportable decisions. In addition, new sources of data — such as sensors placed in vehicles and equipment, or wearables for individuals — can collect first-hand information and present underwriters with a real-time view of potential exposures.
Insurers should revamp underwriter roles to enable more strategic transformation initiatives. The Exponential Underwriter™ will likely see more of their time spent fulfilling a set of new roles requiring higher-level capabilities: technology trailblazer, data pioneer, deal-maker, portfolio optimizer, and risk detective (see Figure 1 above). Indeed, underwriters need to be reassured that exponential transformation is not designed to replace them with automation. Rather, it is an opportunity to free them from more mundane tasks and raise their game, making them far more valuable and ultimately harder to displace.
Effective underwriting transformation involves coordination of multiple initiatives run simultaneously. Progress will likely only go so far as the weakest link across several interdependent strategic imperatives, including data and technology upgrades, modified talent requirements, as well as changes in an insurer’s operational structure and overall culture. This makes collaboration across the various functions a vital component for success. Indeed, underwriting transformation is likely to look more like a rowing team in action, with teammates from different areas pulling together in unison, rather than a relay race, where one function runs its portion alone before handing the baton to a teammate.
Last but certainly not least, insurers relying on legacy ways of doing business and on traditional talent profiles for much longer are at risk of being left behind. The consequences of clinging to current standard operating procedures and job descriptions could be adverse risk selection, a drop in the priority lists of distribution partners, and an inability to attract and retain more highly skilled talent. This could perhaps even start a negative competitive spiral that would be difficult to reverse.
Integrating new tech and data may turn out to be the easiest part of an underwriting transformation since insurers can simply buy, subscribe to, or collect new information sources while acquiring and/or developing the software and systems to capitalize on them. But to become truly exponential and thereby gain a sustainable competitive edge, insurers should also be recruiting new talent and training existing underwriters to take on more proactive roles, as outlined in Figure 1 (above).
The transition to these emerging roles will differ in degree and emphasis depending on the line of business and customer segment targeted by any given carrier. Personal auto and term life insurers, for example, may need more portfolio optimizers as opposed to risk detectives. However, while each insurer will have to determine their own optimal mix, most will likely still need to upgrade the capabilities of their underwriters regardless of whatever roles they fulfill, which is why our research into job postings was so eye-opening.
Insurers not generally advertising for the new underwriting skill sets they will likely need to stay competitive.
Deloitte’s research revealed a wide gap between the advanced skill sets insurers say their underwriters will likely need to thrive in an increasingly data and tech-driven environment, versus what most carriers are actually seeking in their recruitment material.
Indeed, fewer than 4% of the 25,000-plus underwriter job listings posted by life and property-casualty insurers drawn from Deloitte’s Human Capital Data Lake included any calls for what are likely to be critical exponential skills. Some of the biggest gaps involved requests for those who can take on responsibility for data strategy and management, can handle advanced data analytics, or are at least familiar with intelligent automation and emerging technologies. Our analysis spotlights other gaps as well — in exponential skills such as market sensing, product management, and portfolio analysis.
As insurers try to fill the enhanced roles in Figure 1 (above) — especially technology trailblazers and data pioneers—they will be competing not only with other insurers but also other industries for the best available talent. Insurers should therefore develop a multidimensional recruitment plan that includes nontraditional approaches (such as allowing remote versus office-based work, widening geographic outreach beyond a headquarters city, and considering gig workforce models) to make them more attractive to those with these hard-to-find exponential skills.
In the end, however, our fourth and final takeaway is perhaps the most important. That is, we believe insurers that delay implementation of any of these parallel, interdependent goals —upgrading and reorienting underwriters at the same time they are enhancing their data sources and tech infrastructure — are likely to be left behind by competitors committed and able to execute a speedier and more coordinated transformation.
Indeed, Britt Van Dalen, Deloitte’s Underwriting Transformation Practice Leader, sees insurers as more likely to experience a virtuous cycle if they invest in modernizing their underwriting function with new data and technology at the same time they are equipping underwriters with exponential skills and moving them into more strategic roles. Such carriers are likely to be better positioned to garner the most profitable business, gain loyal customers, and have a more energized underwriting force that contributes to the organization in a strategic way — in short, a competitive advantage that is hard to emulate.
(Click here for Deloitte’s full report, “The Rise of the Exponential Underwriter: Leveraging a Convergence of Data, Technology, and Human Capital to Transform Underwriting in Insurance.” Exponential Underwriter™ is a trademark of Deloitte Consulting LLP.)
Former NU Property & Casualty Editor-in-Chief Sam J. Friedman (samfriedman@deloitte.com) is insurance research leader at the Deloitte Center for Financial Services. Follow Sam on Twitter at @SamOnInsurance, as well as on LinkedIn.
Nikhil Gokhale (ngokhale@deloitte.com) is an insurance research specialist at the Deloitte Center for Financial Services and research project leader for exponential underwriting.
This piece is published with permission from Deloitte. See www.deloitte.com/about to learn more about Deloitte’s global network of member firms.
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