Insurers are working with auto manufacturers to encourage safer driving using factory-installed telematic sensors and working with cyber risk management companies to provide comprehensive solutions beyond risk transfer. And ecosystems can evolve beyond insurance and risk transfer to risk mitigation and broader financial management. Sensors are proliferating, generating huge volumes of new, real-time data to digest and monetize. Workers’ compensation and homeowners’ coverage boundaries are overlapping, now that millions are working from home. With mixed-use vehicles, the lines are often blurring between personal and commercial auto insurance. Underwriters will need to adapt to the evolution of risk to remain relevant and stay competitive. Last, but not least, the nature of risk itself is changing. They also need to remain agile and flexible, and use their experience and judgment to manage portfolios, adapt to changing market conditions, maintain broker and client relationships, and keep coverage and pricing realistic in a competitive market. Underwriters need to be able to thrive in both realms-as data pioneers and technology trailblazers. Indeed, there are still gaps between rules-based underwriting and what’s actually happening in the market-shifts in capacity, emergence of new risks, and a subsequent need for coverage and price adjustments-that only a human underwriter can manage. Underwriting will always be partly judgment-driven otherwise, the role could be fully automated. Second, underwriters are being asked to bring more science to the art of underwriting. Underwriters will likely need to upgrade their tools and skill sets to thrive in this dynamic, forward-thinking world. And with rapid digitization, the availability of alternative and predictive data is increasing, which makes risk selection increasingly competitive and facilitates more rapid adjustments to underwriting strategies. Meanwhile, the customers’ world is changing, becoming more digital and interconnected via global supply chains. Take cyber insurance, for example, where threat actors are constantly evolving their tools and techniques, making rearview-mirror underwriting less than reliable. In the future, historical data alone may not be enough to underwrite an evolving set of risks, particularly in commercial lines. First, underwriters are being challenged to move from hindsight, where underwriting decisions are evaluated after the fact, to foresight, where portfolios are actively monitored, to understand the impacts of risks added to their books of business in real time. Three trends stood out that should fast-track the case for underwriting modernization. To understand insurers’ long-term plans and to envision the future of underwriting and those working in the function, we interviewed the chief underwriting officers (CUOs) or equivalent business leaders of several large life and property-casualty (P&C) insurers. Underwriting has been a key focus area: Most insurers have actively been upgrading their underwriting capabilities with more advanced technology and expanded data sources. They may face adverse risk selection, could drop off preferred lists of distribution partners, and may have a more difficult time recruiting and retaining skilled professionals.ĭriven by the need for efficiency and evolving customer expectations, most insurers have been moving steadily toward greater digitization.
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