In today’s world, growth has become synonymous with the adoption of technology. In the insurance industry, we have technology coming to the rescue of the industry as a whole to improve its performance standards. Among these improvements, we want to discuss how insurtechs are enabling underwriters to manage their risk better, by offering many innovative solutions which address their current pain points and improve their processes.
Let’s see how underwriting is being transformed by technology, by leveraging insights provided by data in its operations. The importance of data is being recognized by various industries only recently and in the case of insurers, the collection of unstructured data in Property and Casualty (P&C) is revolutionizing its underwriting and claims management. This ability is further enhanced by Policy Administration Systems (PAS), which allow business users to lay down Underwriting and Business rules for each product and make Underwriting rule changes eliminating the usual delays and costs of a programming intervention.
Insurers are collecting historical data, aggregating public records or heavily adopting sensor devices to collect a lot of data about the usage and behavior patterns of properties and purchasers in an agile way to determine the risk involved in underwriting any insurance policy, keeping it up to date and informed.With the availability of behavioral data from multiple sources like public data, social media, web sites, computers, smartphones and sensor devices; these changes are strategically transforming the very functioning of underwriting:
- Data is helping underwriters minimize their risk, by allowing for accurate and targeted policy pricing based on a purchaser’s prior history and record in a customer-friendly environment with minimal friction. The underwriting process may be automated, with price suggestions being customised to individual customers by the system, using machine learning and machine vision.
- Sensors analyzing the driving behavior and openness to distractions of the insured are helping to determine their capabilities and safety orientation while driving, to enable underwriters to choose the safest of them.
- Insurers are now able to group a number of persons in similar plans and incentivize them, as a group, by offering cashbacks for low or no claims or for displaying a discipline of responsible claims management. An individual member’s behavior gets monitored by the group, lowering an insurer’s risk from inaccurate, false or frivolous claims.
- Data sourced from smartphones is allowing insurers to monitor the behavior of the insured and leverage real-time data to customize their services, products, pricing decisions and risk models to suit these patterns of behavior.
- The sensors worn by workers in certain industries are providing a lot of data which provides insights into the kind of behaviors which lead to injuries. This technology will allow an underwriter to manage risk better and offer more accurate pricing. It can also help to implement better plans to prevent injuries at such a workplace.
- Aggregated information across over 2 billion public records is enabling insurers to assess risk, and to selectively offer their products and services, avoiding higher risk categories.
In the final analysis, insurers today have a great opportunity to gain immediate, actionable insights from the data they keep aggregating from different sources. The algorithms and machine learning tools can also provide an interactive, multi-dimensional and predictable view of risk which can alter the ways in which underwriting operates. We expect the future to unfold more and more developments in this field, better nuanced and highly customized to the needs of insurers, not just to help insurers with managing their risk but also to improve the standard of their services.