Top Underwriting Trends for Small and Medium-Sized Insurance Businesses

Accelerated digital transformation in insurance is here. The rate at which new-age technologies are being injected into the sector has created an environment of flux that is majorly disrupting the industry. As a result, technology has emerged as a competitive differentiator that allows insurers, especially small and medium-sized insurers, to extend tailored customer-centric products and services that help with customer engagement, acquisition, loyalty, and retention. Artificial Intelligence, data analytics, and hyperautomation are some of the key insurance technologies for uplifting the customer experience, with automation in insurance underwriting taking the center stage.

Insurance underwriting is a core business process that directly relates to the insurer’s profitability and sustainability. Ironically, despite the miles of advancement made in technology infusion in insurance by InsurTechs, automated policy underwriting is grossly underutilized – especially in the case of small and medium-sized insurers. To date, underwriters are still left to their means while gathering data, crunching numbers, and estimating risks. As such, the digital transformation of underwriting activities offers immense potential. That being said, it is a broad prediction to make for the future of insurance underwriting. For this reason, allow us to break down the trends in underwriting for small and medium-sized insurers.

Top Trends Transforming Underwriting for Small and Medium-Sized Businesses

• Low-Code based Underwriting Platforms
• Automated Risk Assessment Systems
• AI and ML-Powered Triaging
• API Integration in Digital Underwriting
• Collaboration and Partnerships with InsurTech

1. The Rise of Low-Code based Digital Underwriting Platforms

Gone are the days when digital platforms for insurance served a well-defined but limited role. Modern-day digital platforms, such as those developed by Damco, are highly modular and can help with the end-to-end insurance value chain activities – from prospecting to customer support. Insurers can now pick and choose the features and functions that meet their requirements and only pay for such a service. They lend a unique opportunity to further influence business growth strategies for small and medium-sized insurers. Such a pay-as-you-use model is making such digital tools and platforms highly accessible and affordable to small and medium-sized insurers, who once thought of such digital underwriting platforms as a luxury. The same applies in the case of digital platforms designed around underwriting for insurance.

Choosing agile and automated insurance underwriting solutions developed on low-code platforms can help improve business processes, reduce costs, and enhance customer experience while also reducing risks compared to the conventional way of underwriting insurance. Insurers can also deploy it to automate their underwriting activities. Automated underwriting can make use of RPA and AI as technology drivers and leverage data from customers’ credit history, insurance telematics, and other personal information to generate automated claims decisions, determine how much coverage to provide, and applicable interest rates to underwrite insurance. As a result, risk assessments are performed more accurately in a fraction of the time it currently takes. Overall, it enables them to cash in monetary and non-monetary advantages that benefit customers, employees, and organizations through multivariate ways. As such, we are looking at the widespread adoption of such digital platforms, especially for underwriting, for small and medium-sized insurers.

2. Automated Risk Assessment Systems for the Win

The advent of digital platforms has led to the launch of automated risk assessment systems or ARAI. ARAI forms an integral part of insurance policy underwriting as it makes risk assessment highly accurate and data-driven while eliminating any guesswork. It achieves this objective by capturing inputs through multiple related and compatible technologies such as the Internet of Things (IoT), Artificial Intelligence (AI), Machine Learning (ML), Big Data, Predictive Modeling, etc. The data collected thus is subject to statistical models to analyze historical data on claims patterns, customer behavior, credit history, etc., and determine the likelihood of a loss occurring during the policy period. As a result, ARAI carries out a cross-functional, comprehensive analysis of the different variables to harness data and extract insights from it.

Such insurance underwriting platforms are all set to supercharge small and medium-sized insurers by decoupling business efficiency from the resources available. At the same time, it maintains a high degree of scalability as you can generate a risk assessment report in just a few minutes rather than groping in the dark and making the best possible guesstimate. Plus, it protects the insurer from risks and insurance fraud, which is an added benefit worth looking forward to.

3. Faster Triaging Times

At a time when the right marketing strategy can have your small and medium-sized insurance business skyrocketing to new heights of brand equity, the core business needs to be dynamically adaptable enough to keep up with the new-found demand. Resorting to a legacy system at such a critical juncture will hamstring company growth, resulting in procedural bottlenecks, and even causing organizational machinery breakdown. Even if your employees go out of their way to manage this customer surge, there is still a possibility that despite their best intentions your company could still be at risk of human error or oversight.

Fortunately, underwriting for insurance is heading in a positive direction, especially through the acceleration of triaging times. Triaging is one of the first steps in the policy underwriting process, immediately succeeding customer intake and enrichment. It primarily deals with matching the customer’s scenario or requirement with the right underwriter to compute the best possible insurance policy coverage and rate. While this step was primarily manual until recently, the insurance underwriting solutions and platforms make use of AI and ML to automatically assign tasks and offer customers a seamless experience. At the same time, employees get the opportunity to play to their strengths and win customer favor. Resultantly, faster triaging times will offer insurance policy underwriting a push toward efficiency.

4. API Integration in Digital Underwriting

API or Application Programming Interface is poised to play a pivotal role in insurance underwriting. API integration can be an effective way to revitalize legacy applications and pave the way for digital underwriting in insurance. APIs bridge the gap between insurance and underwriting and offer various use cases that enable underwriters to capitalize on AI capabilities. For example, image recognition and sentiment analysis can be valuable tools for gaining insights into underwriting decisions. With APIs, AI can analyze and assess videos of building walkthroughs, and convert the findings into metadata containing the number of sprinklers of windows detected, and finally present this information to underwriters.

5. Collaboration and Partnerships with InsurTech

In the hyper-competitive insurance industry, it has become essential for insurers to seek out partnerships with InsurTech companies. The collaboration of small and medium-sized insurance businesses and InsurTechs can help solve challenges, improve loyalty, and deliver a better customer experience.

When it comes to underwriting, this consists of forging alliance for analytics. By partnering with third-party data providers, underwriters can unlock access to a wealth of valuable information. Such collaborations help underwriters tap into external data sources such as credit reports, financial statements, bank records, etc. to enhance risk assessment. Furthermore, InsurTech alliances offer customized insurance underwriting platforms that seamlessly integrate with existing systems, thereby eliminating the need for disruptive system overhauls.

Conclusion

The insurance industry finds itself at a promising crossroads that points to improving underwriting. Technology is playing an instrumental role in helping small and medium-sized insurers manage risks effectively while also tackling serious challenges like fraud. As a result, insurers can offer more competitive rates and reduce costs by using insurance underwriting automation. Automated processes make it easier for underwriters to access data on potential policyholders – indicating well-rounded growth. As such, it is safe to say that this is the year of the digital insurer, especially for small and medium insurance companies that will eventually find roots to grow.

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