Five things we learnt about digital innovation in commercial lines this week

By Juan de Castro, CCO/COO, Cytora

Knowledge is power. Information is beautiful. And commercial insurance is ripe for transformation. 

These three aphorisms (some of which are more common than others…) can all be applied to recent research from Intelligent Insurer, which surveyed 300+ commercial insurers to see which technologies they are investing in, which functional areas are most impacted, and which lines of business stand to benefit most. 

In the infographic, which you can download in full here, insurance leaders outline their vision for the future of commercial lines.

We’ve picked our top five findings from the research, which you can find below. 

1. AI and advanced analytics will be most transformative for commercial lines.

In recent years, access to high-quality data has grown exponentially, enabling significant improvements in the way insurers assess and price risks. With the right infrastructure in place, commercial insurers can use AI and advanced analytics to do repetitive jobs such as gathering data and filling forms. This frees up underwriters to spend more time on high-value tasks like risk assessment and broker relationships, while reducing costs. 

But transformation today goes far beyond external data. For example, AI and machine learning can filter broker submissions that are out of appetite or risks most likely to be rejected when subjected to underwriter scrutiny. 

Of course, you wouldn’t make a final underwriting decision on that process alone. But it is enough to provide underwriters with a more valuable in-tray, comprised of in-appetite risks only. This reduces time wasted on unprofitable risks, and increases response times to brokers.

Which technologies do you anticipate will be most transformative for commercial lines?*
Artificial Intelligence & Machine Learning (22%)
Advanced/Predictive Analytics (22%)
APIs (12%)

*Intelligent Insurer, 2021

2. Legacy systems are the biggest tech challenge, but data is challenging too. 

According to the research, legacy systems are the biggest challenge when it comes to leveraging tech in commercial lines. 

Many core systems in insurance are 30, 40 or even 50 years old. Often, those are the systems underwriters need to use on a daily basis. 

These were never built to be systems of intelligence, but rather systems of record. And in an environment where we want technology to enable underwriters to be more productive and successful, a system of record does not do the job.

Additionally, to drive better underwriting decisions you need to be able to triangulate and analyse information across different core systems – from your policy admin system to your claims system to your CRM. Frequently, insurers today find that this can only be done manually. How can you provide recommendations to your underwriters around the attractiveness of a risk when you cannot match policies to claims? 

These challenges result in a difficult decision. Do you replace your core system, which means investing most of your change capabilities in this task for the next few years, at the cost of slowing down innovation? Or do you accept the limitations of the core systems and utilise a tech layer on top, that unlocks the dormant power of your internal data, and enables a nimble evolution into digital transformation ? More and more, we see clients going for the latter.

What are the biggest technology challenges when it comes to leveraging technology and innovation for commercial lines?*
Legacy systems (23%)
Unstructured data (19%)
Data quality (19%)

*Intelligent Insurer, 2021

3. Underwriting is expected to be most impacted by technology in the next 12 months. 

The opportunity for technology to impact underwriting in commercial lines is huge. It has the potential to transform the lives of underwriters for the better, and to drive strategy-aligned growth for insurers.

The heterogeneity of commercial risks means human underwriters are imperative in analysing and pricing risk. This won’t change in commercial lines any time soon – but technology can help support underwriters bind more of the right risks, faster. 

Once a risk reaches an underwriter, it’s already deemed in-appetite and aligned with company strategy. What’s more, it’s been prioritised against other submissions and requests, meaning underwriters are guided to work on the most valuable risk at that time. 

Not only that, risks arrive to an underwriter already enriched with critical data. As a result, they can make the best decisions quickly and effectively, driving profitable growth.

Which functional areas do you expect to see the biggest impact of emerging technologies over the next 12 months?*
Underwriting ( 24%)
Data/analytics (15%)
Claims (12%)

*Intelligent Insurer, 2021

4. Driving operational efficiency is the number one priority for the next year.

Expense ratios today are far too high in insurance and continue to increase, with no sustained improvement in the number of policies per underwriter –  without sacrificing loss ratio. Yet in almost all other industries, we’re seeing the opposite trend occurring, with an increase in total unit output in areas such as banking, lending, communication and ecommerce. 

Technology is at the core of these examples. It strips away productivity obstacles and enables increased rates of production, reduced unit costs, and sustained – or improved – product quality. 

Insurers also want to grow in today’s environment, but are cautious about taking on new expenses. To do this confidently, insurers need to find a way to drive productivity-led growth. I.e., to process more premium per underwriter, both at new business and renewals, without compromising loss ratio. This is particularly important in the current hardening market, where often insurers find themselves flooded with submissions. 

Today there are ways to ensure underwriters only work on valuable in-appetite submissions, and more importantly allocate their time based on the value of each submission. Driving productivity in this way is the only way for insurers to write more profitable risks with the same number of resources, achieving both top line growth and bottom line profitability.

Which of the below are key priorities for your organisation over the next 12 months?*
Drive operational efficiencies (25%)
Improve customer experience (24%)
Make better use of data/analytics (21%)

*Intelligent Insurer, 2021

5. Industry leaders are overwhelmingly optimistic about the potential for technology to transform commercial insurance. 

It’s encouraging to see just how positive industry leaders are about driving change in commercial insurance. A huge 95% of respondents to this study believe that emerging technologies have the potential to transform commercial lines.

Do you believe that emerging technologies have the potential to transform commercial lines?*
Yes (95%)
No (5%)

*Intelligent Insurer, 2021

This insight – and the research overall – goes a long way in demonstrating how receptive the industry is to change. Execs we speak to, however, are tired of the so-called ‘innovation theatre’ often implemented as part of transformation programmes, or explored by innovation teams in the past. 

Today, insurance leaders want technology that can have real impact, driving both productivity and profitability. This is vital in winning in today’s market – and the maturity of technology today means it’s possible to see a real impact on both top and bottom line goals. 

To find out more about how technology can drive growth in commercial lines, get in touch with one of our team.