Next generation of underwriters - equipped with data, technology and analytics

by Juan de Castro, COO, Cytora

Next generation of underwriters - equipped with data, technology and analytics

This is a shortened version of Making Risk Flow podcast, episode 6. You can listen to the full episode here

In this episode, Juan and his guest Silvi Wompa, Group Head of Portfolio Underwriting at Swiss Re are talking about the underwriters of tomorrow. They cover what a role of an underwriter will require – acquiring new skills, evolving their relationship with data and finally how can technology support underwriters in their role.

 

Juan: Hello and welcome everyone to Making Risk Flow. Today I’m with Silvi Wompa Sinclair from Swiss Re it’s a real pleasure to have you join me today. Should we start with a brief introduction of you?

Silvi: Absolutely Juan and many thanks for having me. I have been with Swiss Re for two and a half years now, where I run group underwriting, which means, being responsible for the capital that we allocate to our underwriting and deciding how much money goes into each bucket. Before that, I’ve spent many years in the insurance industry, almost 20 years, which makes you wonder how old you actually are. But I’ve tried to take a broad lens on the industry, I’ve done sales, I’ve done underwriting. I’ve done claims and I’ve done strategy.

Juan: That is fantastic, I thought it would be a really interesting episode to have this chat with you because I was listening to a presentation you did for the InsurTech Insights conference a few weeks ago that’s well-aligned with the concept of making risk flow. You talked about how the role of underwriting is evolving, and how it’s supported through technology. I mean, it would be great if you start with a brief introduction to how you see it changing.

Silvi: Yeah, absolutely. I did speak about meeting tomorrow’s underwriter at InsurTech Insights. I was asked to talk about that because I take a very strong interest in how technology and data are changing the insurance industry. And in particular, how it’s changing the underwriting work that gets done out there.

In essence, what I said was that you don’t really need a crystal ball to take a look at what tomorrow’s underwriter looks like. A lot of people find it very difficult to have a view, but I often say let’s look at a close cousin of insurance – investment management or sometimes even banking. They’re pretty close by, not entirely comparable, but comparable enough for us to be able to say something.

When I think about tomorrow’s underwriter, I think in terms of four main areas. The first one I called, is having a new perspective on the job of underwriting. And I’ll come back to what I mean by that, but it’s really a perspective on risk.

The second I’ve called new skills. So what are the skills and mindset that you need as an underwriter of tomorrow? The third one goes very specifically to the angle of data. So I’ve called it the new ways of dealing with information as an underwriter and perhaps there is a new sense of purpose for the job as an underwriter?

Juan: This is great. You mentioned looking at other industries to inform or give us some kind of indication of how different industries evolve. In the first episode of this podcast, I did something similar going all the way to how manufacturing evolved. As you said it doesn’t always give you the full answer but it’s helpful as it provides a good perspective of where are the major challenges going to come from? So I’m really interested to hear a bit more about your views on these four areas. So should we start with the first one? The new perspective on risk?

Silvi: Absolutely. I have three topics I’d like to touch on there. So the first one is moving from this art that I think underwriting has been considered for a long time to more of a science. What I mean by that is moving from something that is a judgement based to something that is much more data-based and founded on data.

The second angle that I see moving from individual risk selection to having more of a portfolio management view of underwriting. Again, making that parallel to investment management, the 1980s when people would call their stockbroker for individual stock tips. I don’t know anyone who does that anymore. Today you invest in exchange-traded funds.

That’s really the comparison I think will be happening in an underwriting. 

The last angle that I’ve thought a lot about is moving from a view of risks being disconnected. I think a future where underwriters will be better at understanding the accumulation. That is, or could be inherent in those risks that they underwrite one by one and becoming a lot better at seeing their book as a whole, which again, relates back to that portfolio management. So that’s the new perspective.

Juan: That portfolio view and connecting risks together is probably music to the ears of most Chief Underwriting Officers. But that is the way they want to look at their portfolios and the way when they want to select risks. But the challenge is how should individual underwriters change their day to day? Because risks come one by one from brokers, right? What needs to happen for that vision of looking at it as a portfolio to become a reality. 

Silvi: I think there are many things, but I would say the two that are top of my mind. One is having the infrastructure present that allows you a view of your portfolio because that in itself is a challenge today to actually get as correct as possible view of your book. Today it’s often a piecemeal exercise of chasing data and trying to reconcile it and get it together into one place. And I think having that is a cornerstone of being able to take that bigger picture. Secondly, it’s a question of mindset and also leadership. If your top leadership is interested in portfolio management, it’s their job to ask the right questions. And if you ask the right questions, usually there is also an incentive for people further down or the individual underwriter to care. So it’s as much a cultural question and an incentive question as it is about having the data available. 

Juan: You might think this is quite conceptual, but actually I was talking to one of our clients a few weeks ago and this challenge becomes a reality in opportunities such as negotiating a book transfer with a broker. During the negotiation, typically you’re looking at the book as a portfolio, exactly the terms you were describing and quite typically, insurers would close that type of deal. And then, when individual risks are coming through they are treated as individual risks so you don’t capture the benefit of the whole portfolio. So actually if that infrastructure that you’re talking about is there, it allows you to analyse the risk in the context of the whole portfolio. With that, those types of book transfers would be much more successful. 

Silvi: Yes, but also the insurance industry is well-known for its siloed nature. And so that’s also that cultural angle. Maybe we need fewer extreme experts on particular minute areas and more generalists who are able to think crossline and have a little bit of imagination in terms of what could happen. 

Juan: That’s fascinating. Okay. So that is the first area you described this new perspective on risk. You also touched on the second one, the new skills?

Silvi: Yes, and again we can think about three different angles here. For me, the first one is moving from a reality today where many underwriters have very limited data skills. Especially if we’re talking about data engineering or data science, let alone data analysis. I think we will slowly but surely move into a future where some element of understanding data engineering or data science will be a common thing. It will be an inherent part of being an underwriter, or at least being able to work with people who are data engineers or data scientists to understand each other and appreciate what they do as opposed to looking at them as a completely different tribe. 

In that respect also a second angle that I’ve thought a lot about is moving from today where I think many times data is seen as a nuisance. So for instance when underwriters are doing costing they have to fill in another field and another field and I think many people have developed little tips and tricks for escaping the system in order to be able to press save.

And they don’t really fathom that actually what they input is massively valuable further down the value chain because that’s we understand what business we’ve truly signed up for.

The third angle is moving from a reality today where I think very often technology is seen as a little bit of a threat either “oh god is going to make my every day a lot more complicated or it might actually threaten my job” to thinking of technology as a friend, not always an easy friend, but a friend to make the daily life easier. Underwriters could be thinking about how could they apply this technology to help them do their business faster or better or more accurately.

Juan: The way you described the challenge of underwriters having to input the data. It’s quite a painful exercise for complex risks it can take hours just to input all the data and therefore hinders the ability to do proper data analysis. That is something again, using an analogy that’s we’ve seen in many other industries with the failure of CRM deployments. In the end, CRM is all about helping sales people to be more effective at selling, but most implementations fail because it’s actually really complex and time-intensive to input all the information into the CRM. I think if you look at those CRM implementations that have succeeded were the ones where the data entry element has been streamlined and made automatic.

I think it’s the same here. We need to think of how to deploy the right infrastructure and technology to reduce the burden of data input and focus the underwriters more on the data analysis side, as you were describing.

Do you think this is going to be a natural evolution of the underwriters’ skills? Do you see this as something that requires training or do you think it will be something that gradually happens as the years go by – we will get a new profile of underwriters that are more data analytic orientated? 

Silvi: I’m not sure how much training can do. I think it’s about incentives, firstly to help underwriters understand that they are the heroes of the company, in their hands lies the ability to pinpoint what is good business and what is bad. But for that, we do need a little bit of their time and that can be rewarded in different ways. But actually, I put even more faith in technology, because I think today you can design processes so that you cannot move on to the next phase before you have inputted certain critical elements. So I think that’s one angle, but then in parallel, automatically incorporate any information that would be readily available through automated means to just spare that burden from the underwriter. I can see the beginnings of that happening but we’re far from perfect.

I think it’s definitely a journey and hopefully, over time, we can feed some of that information back to underwriters and say “because you made this extra effort, we’ve been able to determine that deals A and B were far better than C and D – good job. Do more of A and B”. Then I think it will start making sense. 

Juan: It’s all about showing the value data and creating the right incentives, which I think makes total sense. Ok, we’ve spoken about the second area – the new skills. I think you mentioned the third area was about data?

Silvi: Yes and how to deal with information, all these things kind of go hand in hand, it’s hard to say where one stops and the other starts. Today. I see a reality where a lot of underwriting is backwards-looking. So you look at the past and try to decide what the future looks like isn’t bad but, I think going forward we can face the future, which bases itself on backwards-looking work, but also on future projections and getting better at trying to figure how the future will look like. And, because of that also being a little bit more dynamic when it comes to adaptation – obviously, nobody will be a great car driver by driving and looking in the rearview mirror as their only outlook. So it’s just about turning that perspective around. 

Um, I think another angle of dealing with data is that, to date, for most underwriters, only the numbers have mattered, it’s been a very numerical profession. Although a big chunk of underwriting is also about the words that go into the contracts that are in fact, the products we sell as insurance companies. I think we will go from this reality today where only numbers matter to words actually mattering too. 

I think we will be in the future where contracts are digitalized, you can catalogue, the clauses you put in there, you can search and find. I think the verbal angle of the underwriter’s job will be a bigger part of the information that is being dealt with. 

And then the last angle that I see a lot of talk about, the blood, sweat and tears is over moving from today’s situation where underwriting is done on proprietary information, to a future where proprietary information is complemented with various forms of third-party information. Not to replace proprietary information, but to enrich the risk view and hopefully have a better understanding of the risk, thereby a more targeted pricing and, and a better loss experience and the best of all worlds.

Juan: Yeah. And then this, this area of third-party data is something that I spend quite a lot of time with insurers on. And sometimes it feels like it’s like something new in the industry, but if you sit down next to an underwriter, the first thing they will do is obviously read the broker submission. The next thing they’ll do is go to 15 different websites from Google maps to take a look at the properties all the way to get JBA, flood data, and sometimes even analyse this like Google reviews on a given business. Those inputs are already part of existing workflows. They are just not structured – the information is captured visually by the underwriter but it’s not captured as part of the risk data. So it’s all about how to formally incorporate all that third party data into the definition of the risk. 

Silvi: And I would also say how do we make life easier for our underwriters? Because like you rightly point out, today this is a job of massively scrambling between different websites and copying and pasting stuff into Excel spreadsheets and so on. You just think like in this day and age, there must be a better way, and I’m sure somebody else could be better placed to gather all of that and funnel it to the underwriter instead of forcing the underwriter to do that very basic groundwork themselves. I think it’s about being a little bit nicer to them as well and helping them on the way.

Juan: It’s about helping them by automatically providing them that data, but also about capturing that data as part of the data you hold about the risk in your policy admin system so you can do analytics on that data too.

Silvi: And maybe sometimes even, you know, challenging what the established 3rd party data source is. How do we make sure that at every given point we review the most relevant information sources, not just what we’ve always been doing.

Juan: It’s a discovery of new data sources that correlate with loss behaviour, for example. 

We don’t have much more time, but let’s touch on the last point. You’ve talked about this new sense of purpose. Tell me a bit more about it. 

Silvi: Yes, I think it’s an amalgamation of what we’ve talked about previously, but again, a couple of angles, I think. Coming from an industry today, which isn’t known for product innovation. Yes, there are some newcomers who do that, but I would say the incumbent industry does very little. I think there’s a great chance that actually we can become so much better and help close some of that now, infamous insurance gap or protection gap, which exists in the world by simply understanding risks better.

Hand in hand with that goes, moving from a reality where underwriters, as we’ve just said, have an enormous amount of routine tasks, which they shouldn’t have to do in this day and age, into a future where most of those routine tasks are automated. Maybe not all, but at least a fair chunk.

Juan: Listening to how you’re describing it should feel very inspirational to underwriters, right? It’s about removing all those tedious activities which drive a lot of frustration and freeing up capacity and time for them to be talking to brokers and to be analyzing risks. Those are a lot more fulfilling activities and the underwriters would like to spend more time on them.

Silvi:  Yes, usually at this point, some underwriters tell me “okay, so there’s no more place for the human being in underwriting” And actually, for me, it’s exactly the opposite. There will always be a lot of space for human judgement and for human relations and human experience. It’s more about targeting it to where it truly matters the most. And hopefully, that should also be what gives underwriters the greatest job satisfaction.

Juan: Yep. Absolutely agree. Silvi, it’s been an absolute pleasure talking about this topic. It sounds like we’re both quite passionate about the future of underwriting. Thank you so much for joining. It was a pleasure. 

Silvi: Thanks for having me.