March 1, 2021 by David Gambrill
Underwriters of the future are going to look a lot more like technology trailblazers, data pioneers, dealmakers, portfolio optimizers, and risk detectives, according to a new report by Deloitte.
“To remain competitive, insurers should accelerate underwriting transformation,” Deloitte states in its new paper, The Rise of the Exponential Underwriter, released Feb. 25. “They can do this by automating routine tasks and augmenting teams with emerging technologies and alternative data sources to empower underwriting professionals to become ‘exponential’— more valuable than ever.”
So-called “exponential underwriters” will be the byproduct of an age featuring expanded data sets, artificial intelligence, and advanced data analytics, as the paper observes. “New data sources and advanced technologies are expected to increasingly supplement yet also augment human underwriters to a degree never seen before,” the report states.
But it won’t be a matter of technology squeezing out the underwriter, Deloitte predicts. “As part of the future of work, the exponential underwriter will leverage emerging tools, information, and skill sets to focus on higher-level challenges and become more strategic in defining the future of the company to enhance business performance and shareholder value.
“Rather than being displaced by automation, exponential underwriters can multiply their value by gaining new skills and transitioning to a set of enhanced responsibilities.”
What will these “enhanced responsibilities” look like?
Deloitte’s report outlines the following five new roles for exponential underwriters:
“Exponential underwriters would likely be in charge of managing the digital workflow,” the Deloitte paper states. For example, trailblazers would have a supervisory role over the automation programs, working closely with IT teams to refine underwriting platforms, automate rule sets, and test the automation’s performance. They would even become more involved in the software development process itself, further reducing time-to-market and cost.
With increased use of predictive datasets, such as telematics and industrial sensor data in property and casualty insurance, data pioneer underwriters would closely collaborate with data scientists to design, develop, and implement analytic and predictive models to improve underwriting and pricing accuracy.
“Data pioneer underwriters will likely need to master how models select or price risks to ensure decisions are defensible to challenges from distributors, clients, and regulators,” as Deloitte puts it.
Data pioneers would use their knowledge to train their frontline underwriting peers on how to provide data-driven advice to clients. They would also regularly engage with regulators early in the development of models and their underlying data sources.
As insurers increasingly use predictive models to assess risk and price policies, “dealmaker” underwriters will partner with sales teams to explain the rationale underlying their decisions to agents, brokers, and insurance applicants. “They will also likely be called upon to help negotiate alternative terms and conditions to close sales rather than present their determinations as ‘take it or leave it’ deals,” as the Deloitte report puts it.
They can also help sales account managers identify attractive risk segments and develop go-to-market strategies with producers. In their role as dealmakers, they would also help identify cross-selling and up-selling activities.
Portfolio optimizers will take a lead role in developing robust, market-sensing mechanisms that provide real-time monitoring of the business environment. Such market intelligence would help underwriters make rapid changes in overall risk portfolios to respond to market trends, thus boosting profitability.
“The underwriter of the future is going to be a great portfolio manager and will have the tools and the analytics for that, and will be able to spend more time in that capacity,” Michael Harnett, Everest Insurance’s chief underwriting officer for North America, is cited as saying in Deloitte’s report. “The underwriters with a more granular understanding of margin analysis and how to optimize portfolios — that’s where we are heading. And I think that’s where the industry will probably be forced to head in order to maximize the efficiency around capital and capital allocation.”
Underwriters who are risk detectives would likely dedicate a significant portion of their time assessing case-level exposure probabilities in exceptional and complex situations, as well as for high-priority clients. Risk detectives would have a deep business understanding, risk assessment expertise, and exemplary communication skills.
They would also “focus on developing and providing exposure foresight to clients, by identifying signals that could predict a potential event that could be avoided or at least mitigated,” as Deloitte states.
Ultimately, insurance companies will need to determine what is the right balance or mix of these five underwriter types on their teams, Deloitte says. And they will need to make sure they are hiring the right people with the right skillsets for these various roles.