Rewriting underwriting to adapt to tomorrow’s challenges

Underwriting is the process of evaluating the potential risks consumers of insurance are exposed to. Consequently, underwriters determine the extent of the coverage the consumer is entitled to, and the price accordingly. Furthermore, they decide whether to approve the insurance policy from the outset.

But underwriting is not just risk evaluation and pricing; it’s a key factor for ensuring top performance. Underwriting can only be successful when taking into account how exposures can change in light of quantitative analyses and forward-looking decisions.

Today, the insurance industry is on the threshold of a paradigm shift in how it offers insurance products, transforming from insurance that is reactive to risk, to insurance that is predictive and proactive. This change is being fired by digitalisation and the demands of consumers for transparency, simplicity and positive customer experiences on all their journeys.

The transformation of the insurance industry is already underway through the integration of technologies such as AI and machine learning, which enable dynamic pricing of insurance policies, as well as automatic, claim-free compensation for any loss. This will have a direct impact on the overall process of underwriting.

Underwriting is going to have to transform. And that’s quite a challenge, since underwriting is historically conservative and slow to change and innovate. Underwriters will be digital managers, and I believe that in the next decade, we will witness extensive changes:

• The underwriting process will be mostly automated, performed in a matter of minutes, and manual underwriting for personal insurance products will no longer be relevant.
• Insurers will be able to make proactive decisions regarding underwriting by connecting to external databases and sources of information.
• Regulators will review AI and machine learning–based insurance products, which will require full transparency of the data, policy management, pricing and underwriting, as well as approving the policy prices.
• Smart, automated insurance platforms will offer consumers the added value of a new type of insurance experience which, just as important as the price, will be relevant to the consumer’s decision-making process.
• Pricing will be available in real-time through data-based assessment of the risk.
• Consumers will benefit from bespoke products, priced according to their individual needs and actual risks.

From distribution and underwriting to pricing and claims, insurance offerings will become automated and available in real-time, delivering consumers only relevant and reliable products, alongside a worry-free and hassle-free insurance experience.

About the Author
Ashley Abdelmoula is a business and product developer with 25 years of experience working in several locations around the world, including the US, the Middle East, Africa and the Far East. Vetted Fit and Proper by the FSB and FINMA, Ashley is now MD for Setoo’s UK Insurance Operations, where he’s utilising his extensive insurance and reinsurance experience to show insurers how they can attract millennials and grow revenue through the transformation in the insurance products they offer.