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The evolution towards continuous underwriting

25 March 2021 Kelly Preston, Data Analytics Manager at SilverBridge Holdings
Continous Underwriting

Continous Underwriting

One of the next-generation practices that insurers are looking to adopt to further differentiate themselves and add value to the customer experience is that of continuous underwriting.

Essentially, this equips them with the means to collect meaningful data from a variety of sources before, during, and after the risk evaluation timeframe. It therefore becomes an enabler to proactively manage relevant and predictive insights to better deliver services to the end user.

McKinsey writes that migrating to continuous underwriting will evolve in four phases which will increase personalisation and customer engagement. Many are currently in the first phase where insurers are focusing on automating the underwriting process to improve efficiency gains and reduce inconsistencies. Phase two sees the move to accelerated underwriting made possible through digitally-submitted applications. Up next will be the focus on micro-segmentation and personalisation for individualised offers resulting from insights generated from comprehensive data sets. Finally, insurers will deliver continuous underwriting with dynamic adjustments based on customer behaviour.

Continuous underwriting will result in new pricing models with the potential for ‘premium’ options available to those end users willing to share the most personal data about themselves. This will enable an insurer to introduce bonus programmes for meeting set targets (comparative to some of the health rewards systems available today) with more flexible fees available as a result.

Future-proof tech

Continuous underwriting leverages technology such as automation, artificial intelligence, and sophisticated algorithms to extract insights from the vast amount of unstructured data available to insurers in real-time.

Not only will these insights eliminate any potential surprises for insurers (and their customers) when it comes to new policies as well as renewals, but also uncover insurance cross-selling opportunities and help manage their risk management requirements. Take the ongoing lockdown restrictions on the sale of alcohol as an example. By dynamically adjusting premiums and coverage for liquor outlets unable to sell alcohol, insurers can deliver a more targeted customer experience from a small business perspective.

Think of the continuous underwriting process as the combination of intelligent automation, sophisticated rules engines, and data gathering to deliver real-time updates to the process without requiring human intervention. And thanks to how artificial intelligence has evolved, the quality of the process is on par with that of human experts who ‘inject’ their insights into the automated tools available to insurers. However, it delivers this more consistently than what would have been possible if insurers were only reliant on human resources.

A new normal

The full impact of continuous underwriting on the insurance industry will only truly be felt once it is more widely adopted. And yet, the increased operational speed will help meet rapidly evolving customer experience expectations as insurers become more capable of adjusting in real-time to environmental variables.

By adopting this continual process and using digitally-driven systems, insurers can also remove much of the traditional human bias that occurred in the way underwriting was done previously. It is now about taking the data and embedding it with the real-time insights necessary for a superior customer experience.

Quick Polls

QUESTION

Financial behaviour experts suggest that today’s risk modelling methodologies ignore your client’s emotional ability / behavioural capacity. What are your thoughts on spicing up risk profiling tools to make allowance for your client’s financial behaviours

ANSWER

[a] Bring it on; my client’s make too many irrational financial decisions
[b] Existing risk profiling tools are adequate
[c] Risk profiling tools should be based on the model / rational client
[d] The perfect risk profiling tool is science fiction
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