Has risk gone digital?

By Matt Churchill, Director of Customer Success, Cytora

Sometimes asking the right questions is more important than the answer. So we were pleased to read a recent Instech London report, which asked: 

  • What information do insurers need when underwriting and managing their exposure to risks?
  • How is information obtained, what is the current “state of the art”, and where are the gaps?
  • Where in the workflow does this information and analytics fit, and how is it used within existing systems?

The report, which you can download here, considers applications mostly for property insurance. But these questions are vitally important across all mid-market commercial lines, from marine to specialty to P&C. 

In this case, getting the right answer to these questions will mark the difference between the top quartile performers in commercial insurance over the next decade. So let’s look at them in more detail here. 

Avoiding information overload

Data is everywhere. In fact, we produced 2.5 quintillion bytes of data every day in 2020. But contrary to popular belief, more data doesn’t automatically mean better results in insurance. 

According to the Instech London report, “the rising tide doesn’t float all boats. Access to data, and the insights it reveals, does not confer the same advantages to all parties.” 

To go one step beyond that, success for any party in the insurance ecosystem hinges on the relevance and accuracy of information. Underwriting teams, for example, need to be able to trust the inputs and clearly understand how they relate to risk.

Until now, more external data has been presented to underwriters in the hope that they can make better decisions and save time. But understanding how to consistently use masses of data, at different levels of completeness, across different underwriters, is proving to be a challenge. 

So imagine if this data was applied to the upstream processing of a risk instead, managing the flow of the risk through the insurer. This means using external data to solve a key expense problem and to unlock the scale economics which can be accessed by digitally processing risk without absorbing scarce underwriting capacity. 

Digitising a risk at source means an insurer can automate the selection of in and out of appetite risks, route risks to the most appropriate underwriter, and prioritise risks based on lifetime value. This is all done in a fraction of a second, turning data into unique, actionable insights. 

Upskill your underwriters

Today, frontline underwriters are still spending between 30-40% of their time on manual tasks. This includes time spent collecting data, visiting many different websites, going to the broker for more information – and that’s before the risk has even been deemed in or out of appetite. 

This also relies on all underwriters understanding and executing in line with the underwriting strategy, which is a big challenge in itself. If you were to make any change to the appetite, responding to market conditions, it takes time to cascade that information and manually retrain each underwriter. 

Insurers need technology to make this whole process algorithmic, to assess the fit of each submission against underwriting appetite, and to either filter them out or prioritise them automatically. This means underwriters spend time solely on in-appetite, winnable risks – even when the appetite has changed. 

Digitising risks at source

One important question in the report is where information and analytics sit within the workflow. Today, many insurers have implemented systems like a PAS or CRM, used to log risk information about a business coming in the door, such as a company name or renewal date. 

But while some of the workflow has been digitised, there’s a gap in today’s underwriting tech stack. Until now, the input into the workflow has been an unstructured document, or a non-digitised risk, which usually needs additional data from various sources. 

If insurers augment and filter submissions and renewals as soon as they enter the business, they can digitise the risk at source. This means the workflow itself can be digitised, connecting underwriters to profitable opportunities which match their expertise instantly – and fully aligned with underwriting strategy.

So yes, it’s all about asking the right questions. But the winners in insurance will be those that find the answer in digitally processing risk.

You can download the Instech London report here, or get in touch with us directly for more information.