For insurance companies, digitization, artificial intelligence and IoT data hold the key to getting the most from underwriting talent, as Pranav Pasricha, CEO of Intellect SEEC, tells Internet of Business.
Traditionally, the underwriter has been one of the most important roles in an insurance business. In fact, a 2015 report from management consultancy Ernst & Young makes a strong case for considering underwriting as being synonymous with the insurance sector itself: “The industry would simply not exist without the ability to evaluate risk, and price and issue policies,” say its authors.
But the role of the underwriter is changing very quickly, according to Pranav Pasricha, CEO of Intellect SEEC, the insurance software division of Intellect Design Arena, a specialist in digital technologies for the financial services sector. What’s more, he adds, that change is absolutely needed, because the skills and experience of talented underwriters are simply not being used to their best advantage today.
As someone with deep insurance industry experience, Pasricha has seen this problem up close. Until 2011, for example, he was executive general manager of strategy, technology and operations at QBE Insurance Group. From his own experiences and those of Intellect SEEC customers, he reckons that around 70 percent of an underwriter’s time is spent on activities that don’t add real value: searching for information, collating it, sorting through claims histories and so on.
That’s not appropriate work for people who are highly skilled, not to mention highly paid. “As an experienced underwriter with talent and judgement,” says Pasricha, “all you should be doing is reviewing risk, making decisions, fine-tuning coverage and setting prices. That’s it.”
Read more: US health insurer Aetna considers Apple Watch partnership
All change
If underwriting today is plagued by too much admin and too much searching for information, technology looks set to change all that.
Digitization means that more information is held on machines, and less on paper. Artificial intelligence and machine learning mean that computers can trawl through that information, picking out relevant records and data and identifying trends and patterns in them. And data coming from IoT devices will increasingly add to the picture, giving underwriters valuable clues and insights into aspects of risk that they might not previously have considered.
This last point is extremely important, because when insured assets (buildings, machinery or trucks, for example) are rigged with sensors, this ‘smartness’ can tell underwriters a great deal about the risks they face and, if misfortune strikes, more about the circumstances leading up to that incident.
In effect, IoT data is all part of the ‘digital footprint’ of an insured person or asset. When Intellect SEEC rebuilt its software stack some four years ago, it was around the principle of this digital footprint, says Pasricha. In essence, the software makes it possible for underwriters to get a more holistic view of risk, by giving them access to online customer reviews, the past histories of company directors, the claims histories of neighbouring businesses. These are all part of the picture that helps them make more informed commercial insurance decisions, he says – and IoT data is a growing subset of that digital footprint.
In other words, the digital footprint of an insured logistics company, for example, might in future contain data from heat and light sensors in its office buildings, telematics in its trucks or video feed from a drone patrolling its warehouse. That would be a big step forward in tackling a shortage of information that can sometimes make underwriting, in Pasricha’s words, “like trying to inspect a room through a keyhole.”
Read more: Survey: Life insurance firms face hurdles in digital transformation race
Looking ahead
So where does the underwriter stand, in this new world of automation and IoT data? Pasricha says it opens up new possibilities to spend more time on more interesting work.
“The role of the underwriter, as I see it, becomes a more fulfilling one. They’ve got all of this rich information that they don’t need to sort through, because machines will do that for them. Through machine learning, those machines will flag up to them issues that need their attention: exceptions or anomalies or alerts that make a specific case more complex than others. That’s the role of the human underwriter of the future – applying their talents and skills to sophisticated decision-making. And it’s a major role.”
Another key role for underwriters, he adds, will lie in helping machines to learn. This machine learning stuff, after all, doesn’t happen on its own, but through ‘feeding’ computers with the vast datasets needed to train them.
It’s time, Pasricha says, for the insurance industry as a whole to change. It should be less about deciding whether to pay out when bad stuff happens, and more about good risk management. And that means quantifying risk more accurately, helping customers to avoid risks and warning them when they face risks – all tasks that fit exactly the skills of the underwriter, keeping them front and centre at the heart of the insurance industry.
Two weeks to go: On 26 & 27 September 2017, Internet of Business will be holding its Internet of Insurance USA event in Austin, Texas. This event will focus on how insurance carriers can capitalize on IoT.
