Automation implies labor-saving steps, which is usually followedby layoffs. So it should come as no surprise that some underwritersdon't look kindly on automated-underwriting solutions, since theyfoster the perception that the underwriter's role is shrinking.

But at least one industry analystlooks at underwriting automation for commercial lines as a way toaugment the talents of underwriters and provide them moreinformation to improve the decision process.

“Part of the problem is education,” says Deb Smallwood, founderof research-and-advisory firm Strategy Meets Action (SMA). “We asan industry need to get better access to external data andpredictive-analytics tools for commercial lines. The maturity ofthe data and the analytics are coming along, but they still aren'twhere Personal Auto is.”

Many underwriters believe they can do their jobs better withoutthe help of automated solutions, Smallwood says. “When you start toget into the commercial markets, [underwriters] consider it anart-versus-science issue. But if you look at small and midsizecommercial risks, there are lots of opportunities for automation.There's been a minimal impact [on underwriters] in terms ofautomation.”

The workflow from automating the underwriting process improvesconnectivity and minimizes the hang-ups that typically happenbetween agents and underwriters, according to Smallwood.

“When information is submitted, it needs to be complete and meetthe risk-appetite profile of the carrier,” she says. “There is alot of back-and-forth going on between the two sides that isinefficient.”

In SMA's recent report (“Underwriting Automation: Insurer Plansand Trends”), Smallwood discovered ease of doing business foragents and brokers was rated the most important factor for insurersto simplify the submission process—but more is expected ofinsurers, particularly within the areas of efficiency andeffectiveness.

“There is a huge gap between underwriting effectiveness andconsistency,” she says. “The way you get consistency is throughautomated rules and workflows, bringing in some predictive models,and scoring.”

Smallwood believes underwriting roles have changed over theyears, yet some underwriters may be in the peak of their career andunwilling to change.

“There needs to be more education to explain that automation isnot necessarily elimination, but that it's needed to improve theoverall underwriting process,” she explains. “The roles ofunderwriters do change, though. They become more portfolio managersand relationship people. Unfortunately, in some cases, that's nottheir strength.”

Smallwood contends no insurer is ever quite finished withautomation.

“I think it's encouraging that automation continues to grow,”she says. “When you talk to mid-tier insurers—which is the majorityin the insurance market—they rarely have specialty or largenational accounts. They don't segment in their minds between thesmall and middle market.

“If you talk to $500-million companies with personal andcommercial lines, they are still trying to sort through the levelsof automation,” she says. “They haven't segmented the insurance theway large carriers have. The technology has finally caught up; nowwe need the insurers to catch up.”