In this fast-paced age of digitalization, the commercial underwriting faces a lot of challenges owing to the assessment and management of the immense amount of customer data. This data includes all the potential risks which are associated with the applicants and their respective assets. With the rise of competition in the insurance world, insurers have to adopt the new technology in order to stay ahead of their competitors.
Underwriting mostly constitutes of the two major processes which are discussed as below:
- Data Gathering: It is the process of collecting the necessary information to underwrite the risks involved during insurance. Although, the main source of data gathering remains confined to direct consumer interactions but automation and robotics have made the collecting of information more on a personal basis.
- Triage: When the insurers evaluate submissions and the risks and direct them to the right underwriting path, it is termed as triage. It involves the use of analytic engines rules, complex algorithms rules, or judgments.
Post triage, the renewals, and submissions are handled in one of the following paths:
- Automated Underwriting – In this process, anticipated models and rules with the help of artificial intelligence and machine learning are used to assess, rate, and provide submissions price.
- Low Touch or Flow Underwriting – This path includes handling of some part of the submissions with automated underwriting and complex submissions needing the expertise of underwriters.
- Full Touch Underwriting – Through machine learning, analytics, and rules engines, the risks are negotiated after handling setting terms, quoting, rating, and pricing.
Key Components of Digital Underwriting:
- Channels & Offerings
- Tools & Services
- Data & Underwriting Analysis
- Underwriting Management & Operations
- The Underwriting Process
New Technologies Impacting Underwriting
1. Artificial Intelligence (AI)
Due to fierce competition in the insurance sector and the increasing demand of the customers for fast claims and underwriting decisions, the need to manage unstructured customer data has increased which is met exclusively by Artificial Intelligence in the following ways:-
- Better Risk Analysis
With the use of Natural Language Processing (NLP), the information provided by the applicants for their assets can be reviewed in a much better way with the help of more client information gathering, leading to better risk analysis.
- Countless External Sources
Data gathering from multimedia, computers, smartphones, and social media helps insurers to provide fast solutions through the use of tools to assess and evaluate this information. Based on the behavioral data, renewal of policies and underwriting of applicants can be done in the most convenient way.
- Improved Process Efficiency
‘To err is human’ and this is true in the insurance world too. Through artificial intelligence, the possibility of error comes down to zero as it is more efficient and accurate than humans. This leads to a better evaluation of information and customer service.
- Real-time Analysis
The relationships between the insured and the insurers are changing with the help of real-time analysis, which is provided by AI. Through real-time behavioral data, insurers can not only asses the information better but also channelize their operations for better customer acquisition and service.
The blockchain technology is being preferred a lot in the banking and insurance sector due to the security it provides through its complex processing of the information which is hard to bypass without proper access, leading to the following benefits:-
- Secure Transactions
The high-value transactions and claims are secured to a great extent with the help of the blockchain technology, especially during reconciliation with the third-parties. Apart from this, smart contracts have come into play a lot as they are only triggered when the defined conditions and terms are met by the customers.
- Well-Organized Subrogation
The use of lost history in order to get data which provides greater insights into the prospective clients makes way for transparent processing of the claims. Apart from securing the transactions during claims processing, blockchain helps in dealing with the complex manual processes.
3. Data Analytics
For risk analysis, a huge amount of real-time data of the customers acquired through digital mediums is available to insurers during underwriting. The data is used to study and monitor the specific patterns and trends of customer behavior, helping underwriters to propose customized insurance policies. Apart from this, predictive analysis help in making better underwriting decisions and pricing.
Social media platforms and app data provide much better products and customer understandings. The insurance sector is increasing the incorporation of credibility techniques, generalized linear, and credit scoring models to arrive at better underwriting decisions.
Behaviour Driven Models
The wearable devices are definitely going to revolutionize the insurance sector and make the underwriting process seamless and cost-effective. Real-time data can be recorded with these devices to provide fast services to customers after understanding their preferences and behavior.
This helps them put the customers in a specific risk-class and propose them with matching discounts and offers. Warning signals and notifications can be sent to the customers for lifestyle tips, potential threat awareness, and avoiding health hazards, resulting in overall claim costs reduction.
The Role of Future Underwriter
The ideal role of an underwriter in the coming times is definitely going to change to a professional for profit and loss due to his intelligent information collection through automation and making the decisions based upon various aspects of the claims and data science. The underwriter’s role will be primarily divided into the following:-
- Sales Segment: Building relations, lead generation, increasing retention rates, and prospecting.
- Data Segment: Anticipated modeling for risk evaluation and pricing through data analysis.
- Customer Segment: Improving agent and customer experience through better accounting coordination
- Innovation Segment: Service and new product development along with innovative problem solving
Customers want customized solutions to their insurance needs, and with the help of the above-mentioned technologies, underwriters have been able to achieve the same to a great extent. The new technological underwriting approach has lead to better navigation of the digital data integration, important milestones, and modernization of the legacy system. This not only benefits the insurers but also provides unmatched services to its customers.
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Having said that, it is imperative for the insurance firms to provide an ample amount of time to their underwriters to learn the latest technology usage and incorporate the same in their underwriting. In case, the underwriters of the insurance firms still find it difficult to manage a plethora of underwriting tasks using the latest technology, the expert team of Insurance Support World can help them with the underwriting support through outsourcing.