Invest in Technology — But Don’t Forgetto Invest in People

A recent survey of insurance underwriters found that 40 percent of their time is spent on “tasks that are not core” to underwriting. The top three reasons they cited are:

Redundant inputs/manual processes;Outdated/inflexible systems; andLack of information/analytics at the point of need.

The survey – conducted by The Institutes and Accenture – also found that underwriting quality processes and tools are at their lowest point since the survey was first conducted in 2008. Only 46 percent of the 434 underwriters who responded said they believe their frontline underwriting practices are “superior” – which is down 17 percent from 2013.

“While underwriters believe technology changes have improved underwriting performance, 64 percent said their workload has increased or had no change with technology investments,” Christopher McDaniel, president at The Institutes RiskStream Group, told attendees at Triple-I’s Joint Industry Forum.

The survey’s findings with respect to talent may shed some light on this. The number of organizations viewed as having “superior” talent management capabilities for underwriting fell 50 percent since 2013 across almost every measure of performance evaluated.

“Training, recruiting, and retention planning had some of the biggest drops, particularly for personal lines,” McDaniel said. About a quarter of personal lines underwriters said they view their company’s talent management programs as deficient.  That rate rose to 41 percent for talent retention; 37 percent for in succession planning; 33 percent for in training; and 30 percent for recruiting

“While technology investment may have improved underwriting performance” in terms of risk evaluation, quoting, and selling, McDaniel said those improvements “appear to have come at the expense of training and retaining underwriting talent,” McDaniel said.

Even before the pandemic and “the great resignation,” insurance faced a talent gap.  Part of the challenge has been finding replacements for a rapidly retiring workforce, as the median age of insurance company employees is higher than in other financial sectors.

A McKinsey study that assessed the potential impact of automation on functions like underwriting, actuarial, claims, finance, and operations at U.S and European companies found that as underwriting  becomes more technical in nature it also will require more social skills and flexibility. Respondents to the McKinsey survey said automation and analytics-driven processes will produce a greater need for “soft skills” to shape and interpret quantitative outputs. Adaptability will also become more important for underwriters to stay responsive to changing risks and learn new techniques as technology changes.

“Underwriters will not become programmers themselves,” the McKinsey report said, “but they will work extensively with colleagues in newer digital and data-focused roles to develop and manage underwriting solutions.”