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

But at least one industry analyst looks at underwriting automation for commercial lines as a way to augment the talents of underwriters and provide them more information to improve the decision process.

“Part of the problem is education,” says Deb Smallwood, founder of research-and-advisory firm Strategy Meets Action (SMA). “We as an industry need to get better access to external data and predictive-analytics tools for commercial lines. The maturity of the data and the analytics are coming along, but they still aren't where Personal Auto is.”

Many underwriters believe they can do their jobs better without the help of automated solutions, Smallwood says. “When you start to get into the commercial markets, [underwriters] consider it an art-versus-science issue. But if you look at small and midsize commercial risks, there are lots of opportunities for automation. There's been a minimal impact [on underwriters] in terms of automation.”

The workflow from automating the underwriting process improves connectivity and minimizes the hang-ups that typically happen between agents and underwriters, according to Smallwood.

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

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

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

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

“There needs to be more education to explain that automation is not necessarily elimination, but that it's needed to improve the overall underwriting process,” she explains. “The roles of underwriters do change, though. They become more portfolio managers and relationship people. Unfortunately, in some cases, that's not their strength.”

Smallwood contends no insurer is ever quite finished with automation.

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

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

Special Reports /

SMA: Commercial Insurers Need to Embrace Automated Underwriting

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