Three ways to capture opportunities in a hardening market

By Dan McNally, VP, Cytora

Let the machines take the donkey work to maximise underwriter potential in a hardening market, writes Cytora’s Dan McNally 

Great underwriters love engaging with customers and brokers, winning and retaining business, and building a portfolio that creates real value for their company. 

With the emergence of a hard market this year, this is exactly what an insurer wants its underwriters to be doing in order to capitalise on the superior returns available.

However, today underwriters only get to spend a minority of their time really driving this forward. And as a result, there’s never been a more important time for insurers to take action and enable their underwriters to reach their full potential.

Underwriting challenges in a hard market

Firstly, to identify opportunities for improvement, let’s take a look at some of the challenges faced by a typical underwriter in the UK Commercial market today.  

In light of the current market, insurers are charging their underwriters with a multitude of tasks. For example, achieving rate increases across their book after years of price reductions, and tightening up on terms and conditions as well as risk management adherence.

Not only that, they’re having to handle increased submission volumes, as competitors harden and churn rises, and increased renewal review work due to changes in customer exposures in a covid world.

Given the infrequency of a hard market, you might expect that the working environment today would be better than ever for underwriters. But an underwriter’s systems environment continues to hamper their output, rather than being an enabler. 

Underwriters have to work with a patchwork of IT tools, from email to CRM, workflow management and claims systems. These disparate systems often lead to inefficiencies and silos, rather than empowering underwriters in the way they should. 

Then there are plenty of external pressures that go alongside all this. Insurer backlogs and service levels have been impacted by coronavirus, while brokers are frustrated with rate increases and unfamiliar market hardening. They’re used to sending out unstructured quote submissions of varying quality and intent that underwriters have to manually review – irrespective of likely value and outcome. 

What’s more, many commercial customers are struggling to survive, and have little sympathy for insurers’ need to raise prices – especially after the latest media coverage on BI claims. 

The net result is that underwriters often feel like on the one hand, they are fighting processes and systems to get work done, while defending the need to drive rates with the other.

This creates an environment where they are on the back foot, instead of being able to delight brokers and customers, and create value for their employer.

So what can insurers do to support their underwriters at such a critical time and capitalise on the opportunities that a hard market brings?

Maximising underwriter potential 

Until now, replacing IT infrastructure and re-engineering business processes have been the most common strategies for capitalising on a hard market. However, in many cases, these are the least effective. 

Insurance is a complex business, because you’re not manufacturing a homogenous widget. The price, terms and value of each customer is unique, so systems and processes must reflect this – irrespective of whether the market is softening or hardening.

The decision making of a truly effective underwriter is centred around these nuances and insights. But sadly, the time to focus on this is often inhibited as they struggle to get through the most basic elements of their workload.

This has led to lots of work to attempt an increase in efficiency, whether that’s through consultancies, IT vendors or process improvement firms. Paper will have been shifted around in slightly different ways as a result, and savings will have been tracked. Normally, this results in incremental sets of redundancies to cover the cost and show marginal benefit.

But efficiency should not be the focus for a hardening market. This is the time when you drive profits, optimise your portfolio and set yourself up to thrive throughout the market cycle. 

In a hard market you want to optimise your underwriters’ time and maximise the opportunity to create superior returns while they are available. That means driving up underwriter productivity, not having less of them.

Doubling down on productivity

Based on a wide range of interviews with UK and global insurers, we understand that there are core areas to drive productivity – either by reducing the need for underwriter intervention, or enabling the underwriter to be more productive when they do engage.

The opportunities for change and the appetite to address them are remarkably consistent across insurers. Below are just a few examples. 

Firstly, underwriters need to be able to spend their time on the risks that have real potential for value. That means being able to divert those cases that are lower value with minimum effort and intervention using the digital capabilities available in today’s market. 

Underwriters often divert the majority of cases they see because brokers are incentivised to cover the market. At the same time, insurers’ appetites are inconsistent and notoriously hard to understand.

Rather than stop the flow of enquiries, automatically review the risks against your appetite using data scraped from the submission, external data and data held on your own systems applied to your underwriting rule set. This cuts out time spent on diverts, and enables you to respond faster to brokers on the risks you don’t want.

Secondly, it’s vital to optimise your capacity and skills across your underwriting teams. All too often, underwriters are still just managing enquiries sent to them individually on a first in, first out (FIFO) basis. If you look at your teams at a more strategic level, there’s the chance to push cases to the right licence level, trade expertise, distribution relationship, etc. 

In a hard market, where enquiries increase, why not actively manage who quotes on which case based on likely value, conversion propensity and capacity available? The net result is more business won at higher margin.

Thirdly, automate the data you captured earlier in the process and present it to underwriters in a single source as much as possible. This cuts down on having to bounce around multiple systems and gives them time to work on trading the case. It also improves morale, reducing  frustration with patchwork systems.

There are plenty of other opportunities like the above across all elements of your organisation, including new business, renewals, MTAs, etc.

What’s vital is that you take the opportunity to focus underwriters on where they add greatest value.

Let the machines take the donkey work, so that underwriters can win more valuable business and make better decisions.

If you’re an insurer looking to take advantage of today’s hardening market, get in touch with one of our team here.