Does the digital streaming of risk really solve the underwriting productivity problem?

By Max Pepe, CMO, Cytora

Every year in commercial insurance, conversations around innovation are rife. Technology, data and insights will change everything, we hear. True I’d say, but when will this speculation help commercial insurers generate tangible business results?  

As it stands, our industry still faces an agonising productivity problem, and we don’t seem to be getting any closer to solving it. Operational costs continue to rise, the industry as a whole is in the red by average economic profit, and overall productivity hasn’t increased in the last ten years.

For the Chief Underwriting Officer, this poses a particularly delicate conundrum. 

There’s the innate pressure to shape a target portfolio and meet loss ratio expectations. There’s pressure from the CEO to drive overall performance growth, and there’s pressure from the COO to reduce expenses and streamline workflows. 

The CUOs we speak to are, of course, more than aware of this dynamic and are eager to solve it. But currently, there’s no clear path to do so. 

Where is innovation when you need it?

Frontline underwriters still have to manually review most submissions and renewals. Meaning CUOs generally face an inevitable trade off when delivering marching orders. Optimise for growth and speed, but incur a deficit in the quality of risk selection. Or, optimise for loss ratio and quality, at the cost of growth.  

So, how can underwriting teams use technology to accelerate cost effectively and power growth, without compromising the quality of their portfolio? 

Best to start with a scenario.

Let’s say you’re a CUO, and your average underwriter assesses 20 broker submissions per week. Of those, 12 are considered out-of-appetite (and thus rejected), 8 of them are quoted, and 2 are bound.

So for every 20 submissions, you’re binding 2. And at this rate, your loss ratio is under control. 

Now, let’s say, to meet CEO expectations and impact growth, you need to increase the number of bound policies per underwriter by 100%, to an average of 4 per week. But, you also need to sustain the same quality of risk assessment and underwriting acumen to protect your loss ratio. 

Based on the aforementioned averages, the only thing to do, would be to ask every underwriter to assess 20 additional submissions per week – at the same pace. Which would mean the poor individuals would have to work twice as many hours. (Untenable, of course). Or, you’d have to hire double the amount of underwriters.  

Either way, you’d still have to pay twice.  Which would inflate expenses, and your COO would soon be knocking at the door with a frustrated look on her face. Growth always comes at a cost and the productivity needle isn’t moving. 

But what if there was a way to achieve the desired increase in bound policies, without having to add any additional underwriting capacity?  That would be a real improvement in productivity. 

The good news is, it’s not just speculation. It’s now possible using technology that can digitally stream risk. 

Turbocharge underwriting by streaming risk.

Today, insurers can set their portfolio appetite and stream desired risks like a Spotify user can set their listening preferences and stream desired music. 

Once risk preferences are set, all incoming submissions and upcoming renewals are automatically digitised and continuously assessed, 24 hours per day, as they flow through the business. 

Risks that don’t meet the defined priority threshold, or are misaligned to an underwriting strategy, are filtered – without any intervention required. This means out-of-appetite submissions are dealt with instantly, in real-time, and never reach an underwriter’s inbox. Therefore don’t absorb any of their time. 

Instead, underwriters receive attractive and in-appetite submissions only. All of which are pre-processed, and delivered with insight to support underwriting decisions.

So in the scenario above, if our underwriters continue to assess an average of 20 submissions per week, they can expect to quote 18 of them, and therefore bind 4 or 5. This is a material improvement in productivity and a significant increase in growth, all without expense inflation or compromising loss ratio. 

As the portfolio evolves, underwriting leadership can continuously tune their risk preferences, tilting the portfolio to its target shape and smoothing out seasonal inconsistencies. 

What’s more, digitally streaming risk in this way doesn’t compromise the role of the human in all of this either. In fact, it amplifies the time skilled underwriters can spend on decision making across the organisation. 

Human and machine working in harmony.

Different risks are best suited to different underwriters. Experienced CUOs and managers know which members of their team are most skilled in specific verticals, or which individuals have particular specialisms, and naturally want submissions to find their way to the most appropriate underwriters as quickly as possible. 

The problem is, routing is largely a manual process. Submissions can spend days in email limbo, bouncing around an organisation, being forwarded to this department and that, before finally landing on the right person’s desk. 

It’s a disjointed process that drains resources, and means attractive risks could be quoted too late. And out-of-appetite submissions linger for too long before being rejected, jeopardising broker relationships.  

Now imagine if you will, an always on playlist of all your desired risks, streamed to you in real time, from a platform that continues to learn what you really want, and what you are best at. This should start to paint a picture.

By digitally streaming risk, insurers are able to route attractive submissions to the most appropriate underwriter, in real time, first time. Which improves response times to brokers, increases quote to bind ratio, and reduces operational costs. 

Music to your ears? That’s the sound of business results being delivered. 

But there’s one thing that risk streaming won’t help you with. And that’s very much by design.

Underwriting is for underwriters.

Experienced underwriters are always best placed to make final underwriting decisions in complex commercial risks, and technology should be there to give them more time, and more power, to focus their efforts on exactly that.

Risk streaming is designed to support underwriters, not replace them – so their skill, experience and craft can be applied to underwriting, instead of sucked up with laborious low-value tasks. 

Technology, data and insights will change everything, we hear.  And the digital streaming of risk will soon become an imperative part of every commercial insurer’s business.

If you want to know more, feel free to get in touch.