How Digital Underwriting Tailors Policies for Insurance Customers By Leveraging New-Age Technologies

Insurance underwriting is a tricky affair. The underwriter has to perform a multi-variable, cross-sectional analysis of the policyholder to weigh in on the risks and rewards to work out an optimum policy at a conveniently priced premium to keep customers happy and business profitable. Naturally, such a process is bound to be specific to the customer’s profiles and requirements rather than following a blanket approach of asking customers to select the best possible option. In other words, the customer should shape the insurance policy instead of the policy influencing customer choices.

Fortunately, a data-first mindset can take all the guesswork out of the underwriting process and make it more efficient and accurate. More importantly, digital underwriting in insurance gives rise to policies that are tightly coupled with customer requirements. Plus, such close alignment is a gift that keeps on giving. Insurers use data to personalize underwriting, and 95% of customers are willing to share more data for such customization – giving rise to a positive feedback channel.

Here’s a deeper look at how digital transformation in insurance, specifically the underwriting process, aids in policy personalization.

Challenges in Establishing Effective Underwriting Programs in Insurance

To better appreciate the contribution of the various technologies in making digital underwriting insurance become a reality, one has to understand the challenges that come with traditional underwriting. The following is a quick overview of the roadblocks to effective underwriting programs in insurance:

• Insurance Product Diversity

  Insurance products are highly complex, which makes underwriting equally complex. For instance, underwriting a life policy would not be the same as underwriting an automobile policy – even though the policyholder may be the same in both cases! Underwriters require specialized knowledge and case-specific resources to offer the entire insurance product suite.

• Risk Assessment Accuracy

  Even the most calculated risks tend to fall short. After all, no underwriter possesses a magic crystal ball to offer a preview of the risks involved. Relying on instincts or outdated models to predict risks can cause policy underpricing or overpricing.

• Data Management

  Insurance is a data-heavy sector, and underwriting is responsible for processing all of it. As such, underwriters not only have to manage all the data but also process it. Add to it the fact that poor-quality data can severely hamstring the underwriting process.

• Regulatory Compliance

  As a highly regulated industry, insurance is susceptible to any changes to the regulatory framework. Such changes will take effect throughout the insurance value chain, including the underwriting process.

• Changing Customer Expectations

  The demand for personalization is one of the key customer expectations to rock the insurance underwriting process. Failure to cater to this requirement can result in customer dissatisfaction and loss of business.

Benefits of Adopting Technology in Underwriting

Now that there’s a better understanding of the issues plaguing the digital underwriting insurance process, it is time to highlight how digital transformation in insurance underwriting can combat most of the challenges. To put it concisely, the integration of technology trends with insurance underwriting grants the following benefits:

• Digital tools such as insurance underwriting software solutions help in automating repetitive and routine tasks involved in the insurance underwriting process. Such automation makes it far more efficient and expeditious.
• Digital underwriting in insurance leverages an array of data and deploys next-gen tools to work with it. The resulting data-led decision-making minimizes the chances of errors in policy pricing or risk assessment.
• Technologies like Artificial Intelligence (AI), Big Data, and Predictive Analytics make underwriting more thorough in detecting the likelihood of risk and event occurrence. As such, underwriters are better equipped for effective risk assessment.
• Automating and digitization reduce the manual effort, paper-based documentation, and operational inefficiencies that afflict the underwriting process. Addressing such problems results in cost savings.
• The combination of speed, efficiency, and accuracy helps improve the customer experience by making it more user-friendly. At the same time, the ability to personalize each policy ramps up customer satisfaction by several degrees.
• Digitalizing the process using insurance underwriting software solutions improves business profitability in two ways. First, it reduces operational and capital cost overheads. Second, it increases customer satisfaction and agent/broker experience, both of which boost revenue.

New-Age Technologies in Personalized Digital Underwriting

Here’s a sneak peek into the new technology in insurance that is transforming underwriting and making it more customer-centric:

1. Data Analytics

Data analytics assists underwriters (or underwriting models) by processing a variety of datasets. It extracts meaningful insights surrounding variables such as customer behavior, demographic details, risk factors, etc., to fine-tune insurance policies and pricing. Such in-depth analysis speeds up underwriting and associated decision-making while maintaining a high degree of accuracy.

2. Generative AI

Generative AI in insurance can come in handy for automating complex tasks. Generative AI models populate synthetic data that helps in propounding different scenarios and their corresponding outcomes. Running such simulations help underwriters carry out thorough risk assessment, streamline operational efficiency, and obtain nuanced insights for smarter, data-driven decisions.

3. IoT Integration

IoT devices generate real-time data on insured assets. The integration of such terminals to develop a web of data sources can not only offer real-time monitoring but also harvest data that indicates asset usage patterns or behaviors. Such granular awareness can help underwriters make an informed decision regarding policy coverage, pricing, and associated risks.

4. Blockchain Technology

Blockchain technology is a new technology in insurance that infuses underwriting with trust and transparency. Its decentralized, secure, and immutable nature helps set up smart contracts that execute upon the fulfillment of certain predefined triggers. As a result, insurers can cut out the middle persons, minimize the possibility of fraud, and extend express service to policyholders.

5. Robotic Process Automation

Robotic Process Automation (RPA) can be instrumental in automating repetitive tasks like data entry and validation. Such proactive data management improves data quality and sharpens underwriting capabilities by reducing error, streamlining workflows, and cutting short processing times. It frees up underwriters to focus on more complex cases than engaging them in redundant tasks.

Conclusion

After the latest wave of digital transformation in the insurance industry, insurance underwriting software solutions should be an integral part of the InsurTech stack. While many of the technologies discussed above are reshaping the underwriting process, innovations like Natural Language Processing (NLP) and Optical Character Recognition (OCR) will further disrupt the sector by making underwriting increasingly effortless.

When it comes to facing this digital transformation in underwriting, offense is the best defense. In simpler words, rather than fighting or resisting the change, insurers should embrace it and pivot workflows to their advantage. Once they do, it won’t take long for them to reap the benefits of a digitally transformed underwriting process that churns out unique policies for every customer!