The landscape of insurance sales and distribution has been completely disrupted as companies take a more sophisticated, technologically savvy approach to facilitating business.
Identifying customer needs has been under the magnifying glass, forcing the industry to rethink how the entire underwriting risk chain should operate.
Michael DeGusta (pictured), CEO of ClarionDoor, a Zywave company, said the need to assess where to implement tools such as automated underwriting is becoming more and more important.
“The explosion of new and more tailored products and distribution experiences has developed to fit particular needs in the market,” he said.
The adoption of automated underwriting is quickly taking flight, but how can the industry utilize this technology correctly?
DeGusta said companies often assume that if they have an abundance of data, they can easily automate underwriting processes, which is not the case.
“There’s a journey that companies need to go through to get from where the industry is today, to that promise land of automated underwriting,” he noted. “You can’t skip over assessing the value of what appears to be a wonderful new data source.”
When it comes to data, insurers must be patient when building out the right infrastructure to support a new underwriting process. Existing tech stacks must be closely analyzed before getting to the prefill stage.
“There is a lot of interest but many struggle when it comes to safely trusting a client’s risk pool to increase automated underwriting capabilities,” DeGusta added. “In order to automate something, it must be clearly defined.”
Profitability is top of mind and a major factor to why the industry is willing to embrace automated underwriting, but there are so many underlying pieces that need to be assessed, defined, and implemented to create an effective underwriting model.
“The big challenge is figuring out how to source and vet all the data options that are available,” he said. “You have to find the data provider, which gets sent back to the carrier to consider if it is worth the integration effort.”
Insurers need to take a step back and look at whether the time and money spent on evaluating new data fields is justified. If the whole integration process is only impacting a small portion of a company’s book, the cost of investment may be just not worth it.
“If you’re going to integrate to an automated underwriting world, you need to quickly and efficiently leverage everyday sources that will help write valuable business,” DeGusta emphasized. “This requires a change in perspective as it could take a long period of time to go through different data providers to get to the point of increased underwriting efficiency.
“Another challenge is asking how all these entities work together and where automated underwriting is occurring.”
Read next: Integrating data into risk management
There is a big focus on operational efficiencies right now and that is where automated underwriting can help quickly review business in a data rich environment, but, according to DeGusta, going from manually underwritten processes and building confidence in automation is no easy task.
“We need to be thinking about the whole journey and how to make it as seamless, data rich and intelligent as possible,” he said. “It’s not just about cost savings, it’s about freeing up those high value resources to better underwrite products.”
