The Importance of People, Process, and Technology in Implementing Digital Underwriting Solutions
by Jai Kumar
Driven by the need for efficiency and evolving user experience, many insurers are investing in and moving towards greater digitization across their operations. But there can be a disconnect between agility and greater reliance on technology, particularly in the initial stages of implementation. In the current competitive and quickly evolving insurance market, underwriters need to be flexible, efficient, and quick, but digital transformation initiatives in the underwriting workflow are typically not easy or quick to get going. The investment in time and technology is worth it, however, and requires a shift in mindset and culture, plus an organization-wide integration of data and technology.
That’s easy to write, but making this shift is no simple task. To achieve underwriter excellence, insurers need to focus on multiple critical enablers, including:
- The distribution channels that insurance is sold within
- The people involved in underwriting workflows
- The process steps in the underwriting journey, from submission and underwriting to quote, payment, and endorsements
- The technology that enables the entire insurance process
To craft custom policies faster, while simultaneously improving price accuracy and improving customer experience across channels, underwriters must leverage advanced technology solutions and data sources, both historic and alternative. Let’s take a closer look at the considerations across people, processes, technology, and distribution to make digital underwriting solutions a reality.
Insurance intermediaries serve as a bridge between the consumers seeking to buy insurance coverage and insurance companies seeking to sell that coverage. While that is unchanged, the methods by which insurance is sold and placed have evolved over the years. Traditionally, agents and brokers were the primary intermediaries connecting consumers and carriers, but now the ecosystem is more complex with bankers, retailers, employers, and other players (including online, direct-to-consumer carriers) entering the insurance distribution space. It is important for insurance organizations to understand this shift as they explore tech-enabled solutions, as connecting these tools to the distribution process will be critical to achieving efficiencies.
Underwriting is a critical role and requires discipline. Many insurance lifecycle processes are designed to support underwriters in making sound decisions. As both customer and intermediary expectations are changing, underwriters must evolve alongside them, adopting new technologies to build confidence and empower decision making. Any successful technology initiative requires buy-in from the individuals who work within that process – without that the new solution is doomed to fail (or at least not to succeed as it otherwise could). This shift in approach, combined with technology, also supports the creation of a culture of collaboration and engagement across functions.
Insurance processes are still heavily reliant on documents, and many of these assets are produced in non-standard formats. Underwriters often rely on worksheets and emails to manage tasks across the insurance life cycle. This process is not efficient and can be both error-prone and time-consuming. With the evolution of distribution mentioned above, response time and data accuracy are of paramount importance. Numerous insurtech companies are working in this space to challenge traditional insurance organization processes and enhance the consumer experience. To meet changing consumer expectations, insurance companies are adopting artificial intelligence and machine learning-based data extraction tools, task automation, and specialized process efficiency and efficacy improvement tools.
According to a recent McKinsey report, underwriters spend 30 to 40 percent of their time on administrative tasks like data entry and manually executing account and risk analyses. This fact, combined with the long-held belief that technology in insurance is less mission-critical compared to other industries because underwriting is an annual transaction that does not require real-time, on-demand execution, has contributed to multiple process inefficiencies. While many (but certainly not all) insurance processes don’t require real-time, on-demand solutions, factors like performance, efficiency, and efficacy are significant issues across the insurance lifecycle.
Modern technology platforms can address these inefficiencies and bring new processes and solutions to the industry. Cloud-based, user-friendly tools can automate many administrative underwriting tasks (like integrated data extraction and submission intake and clearance), helping insurance organizations institute more effective governance, better handling of productivity, transparency across processes, and easier access to data and advanced analytics. Additionally, these solutions can help liberate trained and skilled underwriters to focus on high-value initiatives instead of spending 40% of their time on administrative work. That can deliver real value to insurance organizations looking for improved risk selection and better underwriting results.
The challenges of building a business case for digital underwriting solutions can be significant, from showcasing ROI in the near term to the logistical difficulties associated with any large IT project and the shortage of high-end technology talent available to insurers. An agile and lean approach with a big-picture vision can provide a proven framework for investing in one process at a time to realize organizational value before moving to the next initiative. Technology adoption must be a journey that adapts to the changing business needs, not a destination. By moving forward with a plan that includes not just technology but also considerations for the people involved and the processes affected, insurance organizations can find success and truly transform their operations.
Jai Kumar is VP – digital transformation unit at Xceedance.