By: Pramod Pawar, Associate Vice President – Business Solutions and Alliance Partner, Insurance Business Unit

The current global scenario is undergoing  ‘Great Restructuring’ because every aspect of our life and work is going through a massive change. The way we interact, collaborate, learn, deliver, and expect value is changed forever. The insurance industry is no different, and the restructuring is going to have a profound impact on the future of Insurance products, services, especially on new ways of working  core functions i.e., Underwriting and Claims.

In Commercial Property and Casualty (P&C) Insurance, we continue to experience a growing list of challenges such as climate changes, a rise in cyber-attacks, the global pandemic, and remote working, in today’s scenario. Hence, underwriting excellence continues to remain paramount to insurance business performance.

Recent research from McKinsey’s Journey Analysis of the performance of leading commercial Insurance P&C companies in the US and UK over the past three decades clearly highlights the necessity to achieve excellence in Underwriting. The analysis confirms that operating results, more than capital leverage or investment returns have the greatest impact on the overall financial performance of insurance companies. And within operating results, loss ratio plays a dominant role over expense ratios: when comparing top and bottom performers in both the United States and the United Kingdom, the loss ratio varies by up-to 28% points, whereas expenses vary by just 2 to 4 points.

Unlike retail Underwriting, the risks in commercial underwriting typically are unique and become very complex, especially when one moves up from a small commercial market to a middle, large, specialty and program business. Therefore, it is  essential for commercial underwriters to apply new scientific methods to ‘art (historical underwriting)’ while selecting the right risks or deriving the right risk pricing. Scientific methods include multiple data sources, a historical underwriting performance database, and new technology tools.

There is a need to run data-driven Underwriting functions, to maintain the right balance on key Underwriting functions such as Coverages, Capacity, Risk Selections, and Pricing and Portfolio Management. Being a data-driven carrier is not a privilege anymore, it is a necessity in the current insurance market. With rapid innovation in Technology (multiple AI/ML-based tool sets) and the digital hyperconnected world of consumers (generating massive data every day), today’s underwriters have a perfect playground set to try out their data science and technology trailblazing skills.

To get faster and actionable insights and to run efficient underwriting functions, today’s digital underwriter needs a comprehensive solution, which integrates alternative data sources and seamlessly extract the Book of Business Data. Such a technology platform will certainly elevate the role of underwriters in the following manner.

In summary, the Great Restructuring is elevating the role of the Underwriter from Technology Trailblazer to Sales Strategist. The new underwriter will leverage advanced technology and apply his/her art of Underwriting to focus on new emerging and ever-changing risk landscape. This will make the Underwriter’s role more strategic in defining the future of the company to improve business performance and shareholder value.