Underwriter Of The Future

The underwriter of the future can expect multiple responsibilities within their position. Some would propose that automation would make the underwriter obsolete. However, even with more automation, the underwriter’s knowledge can merge with new technologies to help build a more profitable book of business and a thriving industry.

Greg J. Massey is Senior Vice President of Zurich North and serves on the Society of Certified Insurance Counselors (CIC) for the National Alliance. He is also the Group Vice Chair for the CPCU Society Underwriting Interest Group. Rebecca Freeman is a Senior Manager in the advisory services practice of Ernst & Young LLP. In her current role, she leads product assessments and performance diagnostics. Together they have over 40 years of experience in the Insurance and Financial Services arena. Throughout this article, we will highlight the results they shared from a recent survey of 1,133 respondents:

• 64% of the respondents were largely from commercial lines organizations.

• 21% were from personal lines organizations.

• 59% were largely from large carriers.

• 26% were from mid-sized carriers.

• Respondents were evenly distributed in experience.

Findings from the survey indicated that most respondents felt their role as an underwriter already includes activities outside the traditional underwriting scope. They’re already required to act as a sales executive, data scientist, customer advocate and innovator. Rebecca shared survey highlights for each of these roles:

• Sales Executive Survey Highlights

• Over 78% felt they were already acting in the sales role; Current capacity level in sales skills is somewhat mature or basic.

  • Despite the majority of specialty and commercial respondents indicating that sales executive skills are important, only 6-7% indicated they’ve invested in up-skilling their underwriters with this knowledge and experience.

  • Technology and training will be key areas of investment to bridge the gap in the sales executive function.

• Data Scientist Survey Highlights

• For reinsurance companies, the decision scientist role is more mature—92% of respondents from reinsurance companies indicated data-driven decisions as ‘highly important’ or ‘important’ to their roles.

• While all other business segments from personal lines to specialty recognize the need for strong data-driven decision making, they have not invested similarly in developing this capability. However, there is an expectation that more investments in technology will take place in the next 12-24 months.

• Customer Advocate Survey Highlights

  • Interestingly enough, a considerable amount of respondents indicated that customer advocacy was not part of the underwriter role within their organization.

  • Although not currently a prominent part of the underwriter role, respondents felt largely that future investments in technology and training would take place in the next 1-2 years.

• Innovator Advocate Survey Highlights

• We didn’t have as many respondents at this point in the survey.

• Underwriters seemed unclear if they were actual innovators or how it fit in their role; however, many respondents felt it would be an increasing role for the underwriter over the next few years.

As Rebecca noted on multiple occasions, it’s important to not only identify additional responsibilities within the underwriter’s role, but also the need for investment to bridge any identified gaps. We can’t simply rely on past experiences. The landscape has changed. Respondents identified training, technology and data as key areas of investment.

It was interesting to hear feedback and perceptions from the industry as it relates to the role of the underwriter. It’s also important to recognize what changes are needed to make us better and more competitive. Greg helped provide interesting perspectives on that.

In order to identify the changes that are needed we first have to examine a myth that has plagued the Underwriter role.

Myth

You need to sit at a desk for 5 years to be an underwriter.

Fact

While this may have been the case in the past we must consider the fact that the workforce has changed drastically over the past 40 years.  Today millennials make up about 35% of the general commerce workforce. Only 29% of the workforce are baby boomers. 40 years ago less than 15% of CPCUs had a 4 year degree, today that number is about 85%. 

With this change in the workforce comes a change in the philosophy of how we must develop the underwriter of the future. The mindset concerning advancement for millennials is very different than that of the baby boomer. Greg noted that if there is not progressive experience, millennials are more likely to check out in 12 months.

So how does the underwriter role need to evolve in order to attract and retain talent while continuing to reach customers? Greg addressed this issue as it relates to each of the roles identified earlier in this article.

• Sales Executive

The underwriter of the future must have a sales mindset.  The goal is to out sell or up sell the competition in order to be successful in the insurance industry.

• Decision Scientist

Science is going to make the difference with us moving forward as it relates to data. The mindset of the underwriter of the future should be that “models don’t make decisions, people make decisions”. Models should be used as tools. Although they are smarter on a portfolio level models are not smarter on an individual level. Decision scientist will help manage more on the portfolio level and make decisions on an individual level. As a result of the advancement of modeling tools we can expect that there will be less better skilled underwriters in the future.

• Customer advocate

As a customer advocate we must always ask ourselves if we are product focused or customer focused.  Greg used a Blockbuster analogy to illustrate this point.  In 2004, at the height of its success, Blockbuster had 9 thousand stores. However as a result of its focus on the product rather than the customer that number has dwindled to 13 stores. As customer advocates we must determine how to provide solutions around protecting our policyholders from risks.

• Innovator

As innovators in the insurance and financial services industry we must think outside the box to discover ways to revolutionize the industry. Discovering how we can move into becoming more usage and solutions based is key. We must ask questions like “Why does North America have a limit on the liability that is offered?”.

Just as the best athletes play more than one sport during their formative years the underwriter of the future should have varied experiences that will encourage this type of thinking.

• Leaders

Greg noted that in order to develop the underwriter of the future, leaders must encourage rotational opportunities that will allow for development and support lifelong learning. Leaders should also encourage additional diversity within the role. Diversity of ethnic and cultural backgrounds as well as diversity of thought is vital to the development of the underwriter role.

In order to retain the millennial underwriter, leaders must build understanding around the idea that underwriting is more of a career lattice as opposed to a career ladder. Helping create the expectation that you may move sideways or back before moving up may help to eliminate alienation of the millennial underwriter.  Underwriters and leaders will need to work together to create plans for underwriter development. This should include expanding their comfort zone in order to get additional experiences and giving allowances for some failures. As Greg stated “You can’t learn to box if you don’t get into the ring and you’re going to get a broken nose.”