The insurance market is booming, but competition is fierce. This blog explores the concept of underwriting excellence and how it's transforming in the digital age. Learn how underwriters can become risk advisors, data masters, and performance champions to propel your business forward.
This blog explores how to transform your underwriting team and achieve long-term success. Learn how to develop well-rounded underwriters who excel at risk assessment, data analysis, and client relationships.
The commercial insurance market size is projected to reach a substantial value of $279 billion by 2031, exhibiting an impressive growth at 10.6% CAGR*. This momentum provides a unique opportunity for commercial carriers to redefine their trajectory and emerge as leaders in the marketplace. One pivotal and differentiating factor, among others that will separate the leaders from the laggards is underwriting excellence.
While underwriting excellence remains a widely discussed topic, it offers fresh opportunities and innovative approaches to achieving the desired outcomes. Traditionally, underwriting excellence was defined by the accurate assessment and pricing of risk.
Many insurers focused on specialized risk areas achieving commendable underwriting profits over time. However, the question arises: is it sustainable in the ever- evolving business landscape?
In response to this challenge, many insurers have turned to portfolio diversification via organic and inorganic means. Yet, they remain susceptible to the fluctuations of the economic and insurance cycles. Amidst these complexities, one approach that stands out as effective in troubled times is a strong underwriting culture.
The role of the underwriter is transforming rapidly. Underwriter excellence encompasses three critical dimensions:
The insurance industry is currently undergoing a significant transformation in the role of the underwriter, accompanied by a shift in their behavioural aspects. This transformation is closely aligned with the underwriting philosophy of the organization.
The evolution from being an underwriter to development underwriter is characterized by a deeper understanding of client’s business, risk profile, and financials. It involves identifying potential risks within the client portfolio, emphasizing proactive engagement rather than reactive risk assessment.
Furthermore, this transformation elevates an underwriter to a risk advisor. Instead of solely relying on policy wordings, the underwriter predicts unforeseeable events, assesses their impact while ensuring adequate protection. This approach also entails addressing protection gaps.
The underwriter is also encouraged to become an advocate for flexible, tailor-made products that depart from traditional risk-based offerings with exclusions They should possess the capabilities to identify, quantify and price the underlying risks fostering niche expertise among the underwriting community.
Additionally, underwriters are encouraged to shift from being mere consumers of data to becoming data owners. This involves a comprehensive understanding of external data sources and the ability to predict unforeseeable events. It requires industry knowledge regarding the availability and reliability of data sources.
The second intervention focuses on the organization's ability to monitor and manage underwriter performance and reward them appropriately. Evaluation parameters can be classified into six major categories, with KPIs identified at both the portfolio and underwriter levels. This ensures the recognition and remuneration of underwriting excellence while closely monitoring organizational performance. These evaluation categories encompass:
The outlined approach offers tangible benefits including Optimising combined ratio and addressing emerging catastrophic risks. Increasing digital adoption, reducing operating costs, achieving consistent growth and profitability, and responding to ESG (Environmental, Social, and Governance) demands and fostering innovation.
In conclusion, past performance cannot guarantee future growth, especially in the face of expected challenges. The role of the underwriter is undergoing a significant transformation, and adapting to change and effective performance management are critical for future survival and growth. The adoption of technology and organizational change management can support this transformation.
https://www.bloomberg.com/press-releases/2023-03-23/specialty-insurance-market-to-reach-279-0-billion-globally-by-2031-at-10-6-cagr-allied-market-research
The commercial insurance landscape is changing rapidly. By embracing a culture of underwriting excellence, you can empower your team and navigate future challenges with confidence.
Ready to unlock the full potential of your underwriting team? Contact us today to discuss how we can help you develop a winning strategy.