Productivity in insurance: the underwriter view

Improving underwriting productivity has long been a priority in insurance, and today it is more important than ever.

By Juan de Castro, Chief Commercial and Operating Officer, Cytora

A challenging economic environment and increased competition, particularly in the commercial mid-market, are putting pressure on driving sales effectiveness and identifying profitable growth opportunities. Margins remain low and, despite transformation initiatives, the industry has not managed to break the relationship between growth and cost base.

As a result, the industry is seeing high – and increasing – Expense Ratios. This continues to hinder the ability to expand the underwriting appetite and the total addressable market, particularly in commercial insurance where expense ratios rose from 34.1% to 40.8% from 2013 to 2018 (EY 2020 UK Insurance Outlook). 

What’s more, the end customer has to bear more cost and pay more for their insurance than they should. 

To break the relationship between growth and cost base, it’s essential that insurers drive straight-through underwriting for simpler risks and drive underwriting productivity in those more complex ones that require human underwriting. 

However, the way the industry works today means it is difficult for underwriters to be productive. 

Cytora’s user research team interviewed a cross section of underwriters about the productivity pains they are facing in order to understand where tangible transformation initiatives can help today. Here are our findings. 

The underwriter view 

Many operations in underwriting remain inefficient. Time and effort is still required for lower value, manually intensive tasks like sourcing external data for submissions or filtering out submissions that are out-of-appetite. 

This is reflected in a recent report from McKinsey, which found that “anywhere from 30 to 40 percent of underwriters’ time is spent on administrative tasks, such as rekeying data or manually executing analyses.”

The accuracy of submission data was a recurring pain point for the underwriters we interviewed. Information in broker submissions is often incomplete and in different formats containing unstructured data, leading to frequent back and forth between underwriter and broker.

The quality of broker information can be an obstacle…

What’s more, underwriters are still using disparate systems like Google Maps and Companies House to source data and build a high-resolution, accurate picture of the risk. 

I have to use so many pieces of software and tools to assess a risk…I have too much data to input, that takes up my day. It’s very time consuming…

One underwriter told us they “feel more like an administrator and not an underwriter. [They] can make a decision in ten minutes, but it takes 20 minutes admin”. 

Another recurring productivity challenge came in the form of out-of-appetite submissions. Insurers receive a large volume of out-of-appetite submissions and have to spend time manually assessing risks to deem them in or out of appetite. 

We have to sift through [submissions] and try to find the good stuff…

Regardless of the value, underwriters we spoke to tend to follow a “first in first out” approach to submissions, using their Outlook inbox as a to-do list. 

All these challenges result in underwriters being swamped with non value-added work that negatively impacts turnaround times and their ability to have impactful conversations with brokers. 

In turn, this lowers the chances of converting the most valuable opportunities.  

Driving productivity in underwriting

Overcoming these challenges, highlighted by those on the front line, gives underwriters the opportunity to reinvest time and effort into high value tasks. This can drive profitable growth, while reducing both Expense Ratio and Loss Ratio. 

Reducing manual activities and focusing underwriters on the highest-value submissions has the potential to drive significant productivity gains, accelerating growth and life time value of the book by over 20%. 

Underwriters can also reduce the time spent on manual tasks by using AI to automatically augment the broker submissions they receive with accurate risk data. This enables a reduction in underwriting cycle time, which enables underwriters to increase the number of submissions they can quote and convert per week.  

Additionally, by actively prioritising submissions, insurers have the opportunity to better align frontline underwriters’ activity with their underwriting strategy, resulting in much better control over Loss Ratio.

Future improvements  

There are clear opportunities to drive improvements in underwriting productivity today, and we anticipate seeing insurers begin to break the relationship between growth and cost base. 

This means better experiences for brokers, growth opportunities for insurers, and fairer prices for end customers. 

If you are an insurer looking to improve underwriter productivity, contact us to speak to one of our team.