Underwriting automation will ease competitive and pricing pressures for all sizes of insurers, according to Strategy Meets Action (SMA), and the opportunity for automated underwriting grows as insurers realize their dissatisfaction with their policy administration systems.
Twenty-seven percent of commercial insurer respondents to SMA’s “State of Commercial Markets Underwriting Automation” survey said they were not satisfied with their policy administration systems—the highest rate of dissatisfaction among all technology investments.
SMA theorizes that this is because policy administration systems no longer satisfy the need for commercial lines underwriting in the areas of risk evaluation, analysis and decision-making. On average, 37% of the underwriting process is managed through the respondents’ policy administration system.
“The market is clear about the requirements for the automation of underwriting for both simple and complex risks,” said Deb Smallwood, SMA founder and the report’s author. “The biggest challenge for insurers will be to determine how to meet the underwriting automation requirements in ways that go beyond the traditional approaches.”
When asked which operational drivers need the most improvement, there is a gap between what business and IT professionals view as problems in automated underwriting. Both identify efficiency or productivity, but business professionals indicate that efficiency improvement will come about through better data-driven decisions, while IT prioritizes speed as the solution.
Investment priorities in underwriting automation continue to rise. For both simple and complex risks, underwriting systems, desktop solutions and workstations comprise the top investment area for commercial lines underwriting in the next 18 months. Other top areas for investment include rating, business intelligence and the use of data.
For both simple and complex risks, more than two-thirds of insurers are planning to spend more than 10% of all technology investments on underwriting in the next 18 months. “The projections for technology spending on underwriting automation are healthy,” the report states. “There is a better understanding of what is needed that coincides with a greater appreciation of what is possible.”