The how and why of underwriting transformation

Genpact's Insurance in the Age of Instinct report sets out the shifts that insurers must make over the next 5–10 years to thrive in the future. Powered by data and artificial intelligence (AI), insurance will take a more dynamic and proactive role in protecting the things we care about as insurers shift from premium collectors to lifelong protectors. For underwriting, this means moving from fixed cover to proactive protection, using data to assess risks in real time to offer bundled adjustable cover.

Digital transformation will enable this shift, but what does this mean for our underwriting clients? And what outcomes should they focus on as they build these capabilities?

I'm defining the underwriting process broadly here. It starts with the intake and routing process for commercial insurers, or the quote request for personal lines carriers, and then continues through pricing, quoting, binding, policy issuance, endorsements, and renewals. Our clients are at different stages of their transformation journey. Some are just getting started, so their underwriting process remains fragmented with high-touch, manual sub-processes. Others have invested in process redesigns, automation, embedding intelligent analytics, and so on.

Put simply, it means changing the underwriting operations model in order to improve specific outcomes. The changes focus on three main areas:

• Role delineation: Who does what? What does an underwriter do versus an underwriting assistant?
• The process or workflow: Is it the best, most efficient way of working? Is it standardized across the organization?
• Automating current manual processes: Can you embed analytics to improve operations functions, underwriting decisions, and pricing calculations? Can you digitize the entire end-to- end underwriting workflow? This is where most folks are focusing their transformation efforts

This depends on the business outcomes the individual carrier wants to achieve. There are four outcomes that most carriers are pursuing, in some combination or another. These outcomes are inter-related and co-dependent:

• Efficiency: This means operating with fewer or less expensive resources, steps, and exceptions. Sometimes, simply redesigning a process can make it more efficient – even without automation. And of course, automation or digitization of the manual work is more efficient. The goal here is to drive cost out of the system
• Growth: This requires a competitive advantage. Efficiency can provide an advantage because lower expenses can fund growth via more competitively priced products. Or growth can come from better insights and analytics supporting better underwriting and pricing
• Profit: Profit and growth are the ultimate scorecards. Achieving both requires firing on all cylinders in terms of efficiency, sharp underwriting and pricing, and so on. And profit is almost always a requirement for investing in the marketing spend to drive growth
• The customer experience: This includes agents, brokers, and the end policyholder. Improving customer experience isn't a financial metric, but it's the most important means to the end and an almost unanimous strategy for our underwriting clients. Provide the best customer experience and growth and profit will follow. Accurate and fair pricing fuels new growth and higher retention. A better and faster quote process will lead to a higher bind ratio

Ultimately, carriers are successful if they can operate efficiently (keep costs low), grow the business with competitive products, and maintain claims costs with well-executed underwriting and pricing.

Our insurance clients are influencing these outcomes in different ways. Some are automating processes for a more efficient workflow. Ideally, this eventually becomes a fully digitized workflow. Others have prioritized faster processing for a better customer experience. Some are investing in tools such as analytics to make better underwriting and pricing decisions. And some have taken the opportunity to redesign their operating model to improve all areas.

Most insurers have started to or are exploring underwriting transformation, but to achieve success, they must identify which measurable business outcomes this transformation will support. Reduce costs by X. Improve the loss ratio by Y. Increase policy retention by Z.

Read the Insurance in the Age of Instinct report for more insights on the future of insurance and how successful insurers are connecting, predicting, adapting, and using digital technologies to become lifelong protectors in their customers' lives.