A Managing Director in Accenture’s Insurance Strategy practice, Michael Reilly has 20 years’ experience helping carriers around the world transform their underwriting operations and organizations. We asked him how they should be going about it, and where they should be focusing their efforts.
Why is there such pressure on insurers to improve their underwriting function?
Reilly: There’s a diversity of powerful forces that are disrupting every component in the insurance ecosystem, underwriting included. To remain competitive, carriers need to evolve – and part of that involves rethinking their underwriting. Our research shows that 90 percent of them are already investing in this area or plan to within the next three years. The big question is: are they making the right investments?
What should they use to guide their investment strategy?
Reilly: The over-arching goal is to drive cost-effective, profitable growth, and to do this optimally they need to become digital underwriters. What do we mean by that? There are seven key attributes that define the digital underwriter. Firstly, they must offer solution-oriented products. They must also have heightened market awareness, and technology-enabled underwriting capabilities. They need to adopt analytically-enabled services, and implement cost-efficiencies. The sixth attribute is channel-intimate approaches, and the seventh is agility.
Let’s start at the top – what do you mean by solution-oriented products?
Reilly: Our 2015 Technology Vision report identified the emergence of the ‘outcome economy’ as one of the key trends likely to impact insurers in the future. By that we mean the shift from selling things to selling outcomes; from offering products that suit the insurer’s operating model, to providing customer-centric solutions that meet expectations of more relevant and valued benefits. Digital underwriters will take advantage of mobile, cloud, analytics and other digital capabilities to add impetus to this transition. They will retool how offerings are priced, billed and sold, and they will support the development of innovations such as usage-based insurance, peer-to-peer insurance models and alternative distribution models such as social media.
Why is market awareness more important than before?
Reilly: There’s a confluence of trends – from disruptive technologies to new data sources and analytics – that’s increasing the speed of innovation and making it crucial that underwriters are aware of the dynamics of the industry, and where risks and opportunities lie. We only have to look at Uber to grasp how quickly industries can be disrupted.
The third thing you list is technology enablement – what’s new in this regard?
Reilly: To respond effectively to market demands, underwriters need effective platforms, infrastructure and development / operational processes. However, Accenture’s Underwriting Survey found that only about half of the underwriters polled believed the technology they were using was very effective. There are six key technologies they need to be successful: an analytics platform that improves their ability to gather, prepare, analyze and present internal and external data; a flexible policy platform; an underwriting desktop that provides a nimble underwriting workflow and document management solution; predictive analytics; channel integration; and a flexible infrastructure to support the other five technologies.
The next attribute is analytically-enabled services – surely underwriters have had these for some time?
Reilly: Many carriers in recent years have used predictive modeling of at least one type of risk. But that doesn’t mean they’re analytically enabled. A digital underwriter has an analytics discipline and mindset that embraces the full underwriting process. Four aspects are especially important: the identification of all familiar and new data sources that could be useful; experimentation with cloud and software-as-a-service platforms to evaluate these data sources; an end-to-end process that drives efficiencies throughout the underwriting function; and the integration of their insights into underwriting processes beyond their predictive models.
Cost-efficiency is another trait that sounds familiar – what’s new about it?
Reilly: There’s certainly nothing new about the need to cut costs. But emerging technologies are creating lots of new opportunities to do so. Just a few ideas: improved end-to-end processing; the use of robotics, predictive models, cognitive computing, workflow and rules engines to enhance automation and straight-through processing; putting underwriting and operations processes in the hands of producers and customers to start or complete transactions on-line; adopting improved collaboration technologies; and using analytics and knowledge systems to gather and provide information at the point of need. And of course, digital underwriters also need to address the cost effectiveness of their technology – one of their highest expenses – by considering faster and more agile solutions such as software as a service, cloud and analytics services.
The sixth item you mention is channel-intimate approaches. What is channel intimacy?
Reilly: Just one of the areas where disruption needs to be met with nimble responses is the location at which underwriting will occur. Complex risks will continue to be handled by core underwriters, but not all underwriting will remain within the carrier’s walls. The digital underwriter needs to support and adapt to the unique needs of alternative channels – wholesalers, online marketplaces, and even some direct point-of-sale options – while ensuring that decision making, even if it’s automated, remains profitable.
Finally, what is needed by the digital underwriter to become more nimble?
Reilly: The best underwriting leaders will have different characteristics than we’re used to today. Besides being strong risk and business leaders, they will have to be analytically attuned – this will improve their decision-making and drive profitable growth. They must become more organizationally savvy, sharing knowledge and insights across the enterprise and bringing together its various parts to respond nimbly to market needs. They also need to be more solution-oriented, operationally sound and cost-efficient. As change leaders they will have to confront disruption, engaging their current team and attracting new strong talent. This will include developing new roles and talent to handle responsibilities tied to portfolio underwriting – by this I mean underwriting collections of risk, which is becoming a larger share of the business.
To learn more about this topic, read Michael Reilly’s blog series.