Accelerating underwriting transformation in the insurance industry

How to leverage the convergence of data, technology, and human talent

Over the past year, the P&C insurance industry has seen an alarming surge in underwriting losses, with figures reaching a 12-year high. This concerning situation highlights the need for insurers to take immediate action in accelerating their underwriting transformation and optimizing pricing strategies to minimize risk and maintain profitability.

The negative underwriting results were primarily driven by the growing severity and frequency of natural catastrophes and inflation-related challenges that have led to a higher cost of claims, particularly in the auto insurance sector. These factors significantly impacted the industry's ability to maintain profitable underwriting performance.

In response, insurers must proactively address their underwriting processes by adopting more sophisticated risk assessment techniques and pricing models.

In this blog, we’ll discuss the crucial steps commercial insurers can take to transform underwriting and stay ahead in the face of ever-evolving market challenges.

The case for underwriting transformation

Underwriting is, of course, a critical function that enables you to assess risks, determine appropriate coverage, and establish pricing strategies. By embracing digital transformation, breaking down data silos, and leveraging advanced technologies, commercial insurers can enhance their underwriting capabilities, improve risk assessment accuracy, streamline processes, and optimize pricing strategies.

Implementing these changes will enhance your ability to navigate the complexities of the current market environment with greater ease and maintain financial stability in the face of uncertainty.

Embrace data-driven decision making

In today's fast-paced world, data is being generated at an unprecedented rate. IDC predicts that the collective sum of the world’s data will grow to 175 zettabytes by 2025, for a compounded annual growth rate of 61 percent. Amid this data explosion, insurers are grappling with the challenge of connecting disparate data to effectively harness valuable insights and drive profitable underwriting outcomes.

By leveraging advanced analytics, artificial intelligence, and machine learning, you can harness the power of data to make more informed decisions, enhance risk assessments, and optimize pricing strategies. Implementing data-driven underwriting processes will help you navigate the complex risk landscape more effectively while minimizing risk.

Enhance efficiency through data and technology

As an insurer, you’re constantly dealing with the challenges of disconnected systems, data living in multiple sources and spreadsheets, and time-consuming manual reporting. These inefficiencies can burden your underwriters, leaving them with limited time to focus on more strategic endeavors, like conducting complex underwriting analysis, crafting custom policies, and building client relationships.

The disconnect between underwriting processes and critical customer data can also result in ill-informed decisions that open the door for unexpected claims losses. However, among these challenges, lies an opportunity to transform and optimize your underwriting process.

One area where technology can make a significant impact is when it comes to optimizing pricing. With better pipeline management, rules-based pricing, benchmarking, and what-if simulations, you can optimize pricing of your business opportunities and gain greater transparency.

By leveraging a digital underwriting solution powered by a connected planning platform, you can increase operational efficiency by improving visibility on customer data. Reducing the need for manual intervention also minimizes subjectivity, ensuring that crucial underwriting decisions are made based on concrete data and analysis rather than subjective judgment.

With data-backed decisions, your team can navigate the complexities of the insurance landscape with confidence using data-driven insights to capitalize on new opportunities for growth.

Win the talent war

Addressing the shortage of underwriters is also vital. In June 2021, the U.S. Chamber of Commerce issued a report citing U.S. Bureau of Labor Statistics numbers forecasting that over the next 15 years, 50% of the current insurance workforce will retire, leaving more than 400,000 open positions unfilled. Invest now in talent development programs that focus on ongoing training, upskilling, and knowledge-sharing opportunities.

The right workforce planning solution can help insurers effectively address and manage underwriting talent gaps, ensuring your workforce stays one step ahead in the ongoing talent war.

Solutions like Anaplan can help underwriting leaders identify headcount and talent shortages and model detailed “what-if” scenarios to close gaps, assess financial impact, and drive the right short- and long-term decisions for your talent programs and processes. Ultimately, allowing you to develop and pivot workforce plans as needed to stay in lockstep with changing business needs.

Collaborate across functions

Your underwriting team does not operate in isolation. Collaboration across functions such as claims, risk management, actuaries, and customer service is essential to driving a comprehensive underwriting transformation. By breaking down silos and fostering cross-functional collaboration, you can leverage collective expertise, enhance operational efficiencies, and deliver superior customer experiences.

An integrated planning solution can facilitate seamless real-time collaboration and data-sharing among different teams, enabling them to work together towards common goals, achieving better outcomes for your organization.

Seize the opportunity

With the recent historic surge in underwriting losses, it underscores the critical importance of better assessing and selecting risk to write profitable policies.

As you take decisive steps to accelerate underwriting transformation, you can seize the opportunity to optimize pricing and improve operational efficiencies. By embracing the power of technology, data, and innovation, you position yourself for sustainable growth, profitability, and success in the ever-evolving insurance landscape.