In 2021, underwriting transformation is firmly
on the agenda

By Richard Hartley, CEO, Cytora

What do Lemonade, President Eisenhower and embedded insurance have in common? 

Answer: they all feature – to varying degrees – in this year’s Oxbow Partners InsurTech Impact 25 report. The fourth edition, based on six months of analysis, outlines the trends that are shaping insurance and provides three actions executives should take in the digital decade ahead.

The report also identifies 25 technology-led businesses that are well placed to have an impact on the industry and to help insurers succeed. Cytora was part of the inaugural Impact 25, and you can read about some of our progress in this latest edition. 

Here, we give our perspective on one of the key trends outlined in the article – the underwriter of the future. 

Underwriting innovation is on the agenda

Before we come to underwriting, there are two other themes highlighted in the report. Firstly, distribution and product, a deep dive into the evolution of embedded insurance and ecosystems. Secondly, the disruption of private health insurance, following the rapid growth in telemedicine solutions. Both of these themes are worth close consideration. And both – particularly the latter – have been greatly impacted by societal changes in the past year.

However, it’s the exploration of the underwriter of the future that made us sit up and listen; so let’s explore that in more detail. 

The great data debate 

The maturity of data and analytics in insurance is hard to describe, according to Oxbow Partners. And it’s difficult to give a ’one size fits all’ answer to questions about impact and levels of maturity. 

“Insurers have world-class expertise in some areas such as motor and hurricane risk modelling; in other areas such as specialty underwriting or casualty aggregation, capabilities are still evolving.”

What’s clear is that data is helping insurers evolve across two main vectors.

Firstly, moving from an underwriting approach driven by the experience of a single underwriter to a broader, data-driven and more objective approach which incorporates all of the available data points alongside human judgement. 

By capturing relevant data points, including assumptions at the moment of decision, insurers can continually test and revise beliefs they have, incrementally replace subjective assumptions with data-driven correlations, and optimise decision-making as they digitise more of the workflow. 

Secondly, on a time dimension, insurers are progressing from a retrospective, claims-driven bias focusing on “what happened” to a retrospective and prospective lens. This enables them to answer the corollary questions of what could happen? What should be done? And how do we adapt to likely contextual and environmental changes?

Tackling the triage process 

To succeed in the digital decade, the report tells us that companies need to rethink their underwriting submission and claims notification triage process.

“The level of maturity varies across the industry with volume lines underwriting being relatively advanced but specialty underwriting and all claims lagging behind. For example, many claims triage processes are still a basic queuing system. Technologies like AI and Natural Language Processing can create transformational change here.”

The customers we speak to today are looking to reduce the marginal cost per new submission and unlock growth, without compromising the quality of their portfolio. And by successfully evolving the submission triage process, as explained in the report, they can do just that. 

By encoding their appetite and risk preferences in a platform like Cytora, different combinational rules can be created to allocate risks (and discrete subtasks within risks, as size and complexity increase) to different skill levels, qualified by the level of intervention required. Scale economics emerge when the digitally processed portion of the workflow increases as a % of the total workflow.  

Risks that don’t meet the defined priority threshold or don’t align with the underwriting strategy are filtered automatically. Out-of-appetite submissions are dealt with instantly, in real-time, and never reach an underwriter’s inbox. Then a broker gets a ‘quick no’, and the underwriter doesn’t waste time on the submission. 

Instead, underwriters only see in-appetite, attractive and winnable risks. All of which are pre-processed, and delivered with the relevant information to support underwriting decisions.

Structuring the underwriting process of the future 

According to the report, many corporate and specialty underwriters today are flying on instinct. But if insurers can automate more of the underwriting and claims handling process – namely, digitising the risk and workflow – underwriters will be equipped with analytical horsepower alongside their judgment. This will fuel a faster, more accurate trial and error process, which can be sustainability transferred across the organisation. 

At the same time, process efficiency will unlock valuable time to spend on high-value activities, increasing the time spent on decision making, crafting the right policy to the risk, and broker relationships, enhancing the effectiveness of post quote activities.  

You can download the Oxbow Partners report in full here.