All Aboard for Modernisation: Next Stop Underwriting - Paper - Page 8
Evolution of Underwriting
Original
Lloyd’s co昀昀ee
shops
Paper
applications
Dumb
terminals of
basic data
points
Browser
based data
with ability to
embed or link
data
Social media /
chat /
multi-media
Enriched
data / AI /
Augmented
Underwriting
Figure 0.3: Evolution of underwriting
The core purpose of any insurance business is to
underwrite risk, and without an e昀昀ective underwriting
function, the 昀椀nancials of the business become very
vulnerable. With much of the insurance industry
operating on 昀椀ne margins, every single bit of
underwriting e昀케ciency and insight secured counts.
Even if an insurer could create as seamless a
process as Amazon, or customer satisfaction levels
comparable to Apple7, outdated underwriting
processes will continually 昀椀ght against this
modernisation, delivering sub-par underwriting
results. Recent research estimates that 70% of digital
transformations fall short of their objectives. In
contrast, businesses that invested in modernisation,
productivity improvements, and better customer
experiences-true digital transformation outcomes –
outperformed their peers by achieving 1.8x times
higher earnings growth8.
From conversations and contracts written up in Lloyd’s
co昀昀ee house, through to the arrival of dumb data
terminals and on to the data-rich world we enjoy
today, the way in which insurance ingests information
has changed over time, and so too has its purpose.
In a previous whitepaper – Service disruption: next
stop claims9 – Altus dug deep into how the claims
function and claims supply chain could be improved.
In that, we highlighted the need for system thinking
as well as process thinking: “While technology plays
the key role, it cannot operate e昀昀ectively in isolation.
Technology must be the enabler, supporting and
supported by well-designed, human-driven and led
processes”.
Modernisation begins with underwriting
The need to change track to reach modernisation is
more urgent than ever with the ‘high speed rail’ e昀昀ect
of businesses scrambling to use Generative AI. The
technology is sound, and a wide range of applications
have been found, but many businesses will su昀昀er
from their lack of real transformative thinking. The lack
of disruptive operational and technological design
means they simply won’t get the return that their
investment in Generative AI deserves.
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8
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The need for a modernisation approach is most urgent
in the underwriting function. It is the foundation
of every insurance company and as such, should
be the ground zero of all modernisation plans. Its
role is heavily impacted by adopting technological
advancements and shi昀琀s in business models and
appetite. True modernisation will o昀昀er more e昀昀ective,
e昀케cient risk selection and pricing, the ability to
manage greater volumes of submissions and it will
昀椀nally remove the weight of manual processes that
dull underwriting e昀昀ectiveness.
The success of any insurer is more dependent upon
the risks it selects than the investments it makes
or claims it pays out. Modernisation starts with
underwriting but must be repeated across the whole
business estate to realise the full bene昀椀ts of the
investment. It is only then that the true transformation
of insurance will take place.
“The insurance industry and
underwriting in particular are great
candidates for modernisation.
Insurance is, culturally speaking,
more conservative than many
other sectors, and there can
o昀琀en be resistance to wholesale
change. Which is why an
incremental, methodical approach
to modernisation o昀昀ers the
greatest chance of digital success
to the insurance sector.”
https://www.digitalinformationworld.com/2023/05/apple-achieves-81-customer-satisfaction.html
https://www.bcg.com/publications/2020/increasing-odds-of-success-in-digital-transformation
https://www.altus.co.uk/insights/whitepaper-service-disruption-next-stop-for-claims-2/
Mark Andrews
Altus Consulting
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