Insurance Underwriting Needs a Full Refresh

Insurance, especially general insurance, is at a tipping point – driven by increasing frequency and severity of natural disasters and a lack of investment in the technologies needed to keep pace with this change, let alone get ahead of the environmental, social and governance expectations on insurers in delivering this essential service.

In a recent article I talked about the capacity constraint many insurers face in meeting customer expectations.

This report from Capgemini

https://www.capgemini.com/wp-content/uploads/2024/04/WPCIR_2024_web.pdf

encapsulates those challenges from an underwriting perspective and, while I do not necessarily promote them (or any other member of the cohort of global consultancies - my experiences with them being mixed, at best), their latest insurance sector report ‘Become an underwriting trailblazer’ engagingly captures the impasse our industry has found itself at and the frustration of the contributing underwriting professionals that things are not progressing anywhere near fast enough in addressing the structural inhibitors and keeping our profession relevant.

I strongly recommend to the insurance professionals in my network (and those who rely on insurance as a risk transfer mechanism) a read of this report which includes many of the same basic causal factors I previously highlighted, including –

1.?????? Legacy technology

2.?????? Lack of accurate data

3.?????? Limited workflow & decisioning automation.

What the report doesn’t emphasise is that, because insurance is a product where the cost (of manufacture) is not known until after it has been sold, there is a responsibility on all insurers to ensure they have the best product development and pricing tools available, and that their administration platforms are fully integrated across the distribution chain, so that insurance remains accessible and affordable.

As the report said when talking about policyholder expectations not being met and the circumstances driving churn and under-insurance -

Insurance is an essential service and regulators are increasingly reflecting this in the expansion of consumer-centric requirements on insurers. As a profession it is something so fundamental to get right yet, despite 40 years in the making, our major insurance corporations remain sluggish in their response to current market drivers and growing regulatory expectations, and continue to lose ground to more nimble underwriters backed by new capital.

And, over the 40 years our industry has allowed this degradation to occur, the lack of investment in people (especially the underwriters who hold the pen), has meant a dearth of talent to energise this response – with those that remain preferring the agility, freshness and market smarts of the specialist newer players to the cumulative dead hand of the generalists.

A vicious cycle, indeed!