Tomorrow People

Underwriting Software: Panacea or Poison?

Blog post   •   Aug 14, 2012 09:51 BST

Underwriting software is a growing area and those wishing to remain at the top of their game must learn to exploit the positives of automating the underwriting process and embrace the changing face of the insurance sector.

It is without doubt that underwriting software has changed the role of Underwriters, with some fearing they are resigned to an administrative role, rather than being a risk assessor. The use of underwriting software can be looked at in the wider context of whether underwriting is an art or a science. A poll at a debate hosted by the Lloyd’s Market Academy (LMA) in March showed underwriting was considered an art, but only just as the vote was won by 49 to 45.

Those who believe it is an art are sure to have concerns about the increasing use of underwriting software.

There have been a number of concerns within the insurance industry that software is allowing companies to use cheaper graduates in underwriting roles, rather than employing expert Underwriters.

Barnabas Hurst-Bannister, former chairman of the LMA, argued that “We pay Underwriters to exercise good judgement”, which cannot be replaced by a computer programme.

Much like the broking side of insurance, underwriting still needs experts in place to help deal with complex insurance cases. Although software can be beneficial in straightforward underwriting cases, it may not flag up specific risks that a trained Underwriter would spot.

Hurst-Bannister also warned that if ‘science’ was allowed to rule underwriting there was a concern that Underwriters would feel it was “Safer to decline a risk than accept one”.

Despite the limitations of underwriting software, its prevalence cannot be ignored and its positive traits must be exploited.

No Underwriter would doubt that working on an automated programme that streamlines the underwriting process saves them time compared to working manually. This time frees Underwriters up to focus on specific complex issues within cases and allows them to process more cases.

Freeing up time is not only good for the Underwriter’s case load but it is good for businesses. Increasing the number of cases processed can drive through profitability and in turn fuel growth and expansion. It also allows companies to match fluctuating demand with process capacity.

The insurance sector has made a swift transition to online and i-markets. It is only fitting that as consumers buy online, brokers work increasingly through smartphones and tablets and underwriting becomes more automated.

Underwriting software is a powerful source of information for Underwriters, with another former LMA chairman, Paul Jardine, describing the information it provides as a “strategic asset”.

A computer programme will never be able to match the skills and experience of a trained Underwriter. As Hurst-Bannister said: “Science can help the Underwriter but it is not the essence of underwriting. We should use science liberally but not slavishly.”

For more ideas on how the sector is changing, please download our eGuide ‘Four trends every general insurance professional should know’.

Guest Post: Tony Bates is the managing partner of IDEX Consulting, providing advanced talent management for the Financial Services sectors. You can read more on his expertise on how to progress careers in Financial Services by reading IDEX Consulting blog here. You can also find him on Google+ and LinkedIn.