Modernising underwriting: the innovation partner view

The two constants in our world are change and legacy. Carriers have been on the back foot and are now realising the impact of unforeseen changes and under-investments in underwriting modernisation, as their loss ratios hit the high notes—and younger underwriters hit the road.

As a mid-market carrier, how do you come back from this? Where do you start? How can you take industry best practices and adapt quickly, while keeping your “secret sauce”?

In this Underwriting Innovation USA session on November 9, 2021, Jim McKenney, chief strategy officer and products business head of Intellect SEEC, will discuss some of the themes he is seeing first-hand among carriers who are technologically and culturally savvy—and those that may need some help.

McKenney spoke to Intelligent Insurer ahead of the event.

What are the defining characteristics of a ‘savvy carrier’?

The scale of the organisation allows you to differentiate investments. The top five or 10 establishments have been out in front for some time because they have more scale and therefore the ability to invest or put forward whole teams of data scientists.

Super-regionals and mid-sized insurers can’t invest at the same level.

On the personal lines side, there has been consolidation in the top half, creating those sizeable organisations. In commercial lines, the industry has been much slower to consolidate and, with modernisation happening at the pace it is, there is a risk they can’t keep up in the arms race.

What tactics can smaller companies use to put themselves on a more even footing?

The super-regionals and mid-sized insurers have done well, nevertheless. Their relationships are deep and that is a key facet of the business which mustn’t be lost. But when it comes to technology, innovation and modernising, mid-sized businesses tend to buy rather than build, because of the scale challenge.

Having spent nearly two decades on the carrier side, involved in building many systems, I’ve seen both sides of the coin. It’s good to buy when you need a tool that isn’t directly responsible for your competitive advantage and differentiation—for example, if it’s an efficiency play.

But when it comes to building, smart carriers start with something that will become their “secret sauce” rather than deal with efficiency.

If carriers buy in, what can vendors bring to the table?

A lot of vendors are totally focused on point solutions. That gives them the ability to refine that solution over time. Whether it’s about ingesting or managing data through a submission, a lot of vendors have refined the solution. That’s a great place to buy rather than build.

Eventually, those vendors who put the greatest volume of transactions through their solutions will have the best shot at self-learning and therefore will be able to create artificial intelligence (AI) solutions that improve the fastest. But it’s essential that whichever point solution expert you choose, their domain expertise is focused on insurance.

Intellect SEEC has a sister company that is focused on banking but, by being very intent on the insurance industry, it allows us to improve, refine and understand our clients’ businesses.

With so many ways to improve underwriting, how do lagging carriers prioritise?

I come from an agile technology environment, where delivery is all about minimum viable product and quick wins. If you break things down into bite-sized segments, you get an immediate return and build the momentum you need to move forward.

It’s all about figuring out how to implement quickly. Design thinking should be front and centre when it comes to informing decisions. Who and what are you solving for? There are different ways to break the problem down, but bite-size is the way.

What does it mean to modernise underwriting?

The baseline is that our industry is quite archaic in its way of doing business. Our perception of it differs greatly when our consumer hat is on. There are a lot of manual processes involving the touching and manipulating of information, and there’s a lot of non-value-added activity in those processes.

When you bring modernisation to an inefficient organisation, rather than simply tweaking around the edges you have to rethink your operating model a little bit. Back-office roles would typically tee-up information, hand it to an assistant and then on to the underwriter. When you bring in AI, it causes you to rethink roles, with assistants moving quickly to become junior underwriters. It can become quite exciting for certain roles.

There’s a potential crisis of talent coming into our industry. Future underwriters will refuse to work in the insurance environment as it stands. How we underwrite today, compared to our personal experiences in retail, for example, are two very different things.

If you don’t have a process that is as easy for your employees as the actions they take in their personal lives, you’re going to be adversely selected as an employer brand—let alone an insurance brand.

The good news is that we’re catching up. We may not be Silicon Valley, but I’m happy to see significant change.

Jim McKenney, chief strategy officer and products business head of Intellect SEEC, will lend two decades’ worth of experience to the challenges facing the underwriting community at Underwriting Innovation USA on November 9, 2021, at 3:10pm EST.

This is the biggest online event tailored specifically to underwriting—don’t miss out. Register now!