Insurance Underwriters facing extinction?

Written by Gareth McChesney, Underwriting & Pricing Director, Motor Insurers’ Bureau – Henley Business School

Across our Insurance Companies are Personal Lines and SME Technical Underwriters an endangered species? Is automation doing to the Underwriter that which Global Warming is to the Polar Bear? And if it is, does it matter and should we be concerned?

I have been asking myself these questions following a recent experience shared by a friend. He is taking his summer holiday next month and travelling by motorbike to what was Yugoslavia. This trip is organised and lead by BMW Motorrad Tours, the travel arm of BMW in the UK and is a typical sight-seeing road trip across Europe. However, part of the trip goes outside of the EU, into Bosnia, and he has correctly been advised that he needs an insurance Green Card for this part of the journey. The travel company advise that this should be straight forward to obtain from his insurer and shouldn’t cost very much, if anything.

The gentleman concerned has a small collection of cars and motorcycles and has them insured through a Private Clients policy with one of the world’s largest insurers. You will appreciate this is not therefore a policy purchased on-line via an aggregator site where price has been a strong consideration, with the expected level of standardisation a given. Details of the trip were provided to the insurer and the Green Card requested as he was advised.

This is where the case study gets interesting. The request was referred to a Senior Underwriter in the company. The underwriter set out a number of reasons why they would not wish to cover him in Bosnia, including;

– The potential existence of land-mines from the ’92-’95 war

– The fact they don’t have a local office in Bosnia

– Local driving style might exhibit heavy braking behaviours

– Premiums in the country have increased heavily in recent years

The insurers advice, can the customer please obtain insurance cover from another provider.

This isn’t a particularly good customer outcome, but that aside it highlighted for me the lack of technical knowledge that existed within that organisation which lead to the preference being for a reason not to offer the cover. The Green Card system, operated in the UK by the Motor Insurers Bureau, did not appear to be understood by this insurer. Despite this customer personally paying several thousand pounds a year purely in contribution to the insurers expenses he did not appear to be getting rewarded by access to knowledgeable insurance professionals.

Automated underwriting has been a great thing for the industry and the customer. It allows for decisions to be reached quickly, potentially allowing the customer to service their insurance policy themselves at their convenience on-line. But is the insurance industry now lacking the technical knowledge needed to set the underwriting perimeters, set the underwriting strategy, write the underwriting algorithms and to actually assess the risks that are presented?

The insurance industry ultimately provides products and services which are designed to satisfy a customer need. We are now living in increasingly complex times, Brexit will bring changes to legislation and practices, customer behaviours are changing and how we live and spend our money is changing. Cars are becoming electric, ownership models usage based and the sharing society is emerging. None of these factors are adequately catered for, I would argue, within insurers current products or underwriting rules. Who is it that will be Underwriting these new risks to avoid many more “computer says no” scenarios and dissatisfied customers? Do insurers have that expertise today, and are they investing in it for the future?

A quick review of the larger General Insurers’ strategy documents and Customer Centricity is a common theme. Can this be delivered without investing in Underwriting Technical Skills? Understanding the customer’s needs, and finding solutions has to be core to this strategic objective, and I question how this can be delivered without the insurer having the best Underwriters.

Automation brings efficiency, and means fewer Underwriters are required but the few that are required need to have much deeper technical capabilities. Is the industry investing sufficiently to recognise this, or are our Underwriters becoming extinct? The industry is investing in and rightly strengthening capabilities in the areas of Pricing and Portfolio Management, but I fear this is at the expense of other essential technical skills.

I believe those insurers that focus on and invest in technical underwriting skills will have a competitive advantage, greater customer engagement and ultimately be rewarded through the profitable growth that all desire.

Are Technical Underwriters an endangered species, I fear currently they very well could be. However, my view is that they are needed, the industry will thrive through investment and focus in this area and it is not too late.

And finally back to our friend and his travel documentation. After I provided some educating and coaching I understand the insurer found a solution, kept the customer and I believe a Green Card is in the post.

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2 comments for “Insurance Underwriters facing extinction?

  1. Syed Moheeb
    February 16, 2020 at 10:06

    An accurate perspective of current state of affairs. Retired now after 43 years in the industry, I lament the deteriorating standard of underwriting expertise in my country; where the trend is towards personalised/customised underwriting elsewhere, the trend here is the opposite. Thank you for highlighting this issue.

    • March 4, 2020 at 08:53

      Hi Mr. Syed. Thanks for the comment. A known fact, for the sake of to growth the basics of UW are cast aside. Proposal forms are waived whereas this is not the case in the more developed countries. Whoever has the business gets better treatment (of course with the extras) even if loss ratios are high and unsustainable ….

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