When It Comes to E&S Underwriting, Data May Be a King, But the Human Touch Is the Queen
Digital technology has been used in the insurance industry for years to increase speed, efficiency and accuracy throughout the insurance process.
Technology also allows carriers to utilize data to carry business functions that range from predictive underwriting policy quotes to customer relations to improved internal processes. Insurtech companies have disrupted how insurance carriers manufacture, underwrite and bring products to the market.
Overall, the goal of the technology is to help create efficiencies throughout the commercial insurance value chain. Digitalizing the mundane aspects of the sales and claims cycle saves time and money and improves internal efficiency and customer experience.
Data Usage in the Insurance Industry
Carriers, brokers and agents who embrace these ever-evolving digital innovations will lead their competition in growing their business and be better positioned to address the changing needs of their customers. For agents, the adoption of these digital tools will help them to focus on what they do best: assisting and advising their clients.
On the carrier side, eliminating a human from mundane tasks frees up underwriters for more meaningful interactions. Also, the underwriter has the data already collected by the digital tools and the time to review the more complex issues that could arise, which is especially true in the E&S market.
Importance of Using Data in E&S
Data analytics helps to construct basic patterns, get fundamental insights about the insurance business and manage the complex relations between agents and clients.
The insurance industry has invested heavily in data and predictive analysis tools, allowing it to:
- Understand customer behavior
- Target potential and current customers more precisely
- Improve business intelligence
- Enhance customer experience
- Increase claims fraud prevention
- Pinpoint predictive decision making on potential risk
Data points such as internal and external information about the weather, past claims, construction, zoning, crime, accidents and more can be used to help determine the risk in writing a commercial insurance policy.
An accurate and automatic predictive model can be built to better understand how much a claim will cost and can be used to identify potentially fraudulent activity.
There are millions of types of data points that impact the E&S market. E&S insurers can discover new opportunities and mitigate risk challenges by looking at the data and identifying trends. E&S carriers can take advantage of advances in data and analytics to transform their underwriting and pricing operations.
Underwriting Reliance on Data and the Human Touch
Underwriting is more than risk selection and pricing.
It requires a comprehensive set of capabilities, qualitative judgments about future industry performance and rigorous portfolio management.
Underwriting operating models vary based on industry, region, client size and product. Underwriters must look at the many nuances of commercial performance, including treatment of prior year development or catastrophe and shock losses, when writing and renewing policies.
Technology can be a beneficial complement to the knowledge of an underwriter. The available data can supplement human judgment, enabling many successful underwriting teams to outperform their peers. But there must be a balance between relying on too much data and human intuition.
Ultimately, the process of evaluating risks, especially in the E&S market, depends on an underwriter’s experience and judgment.
Technology will be helpful in taking over mundane insurance activities, leaving underwriters more time to look into client risks and provide the human touch. Underwriters can blend data analysis, risks and specific client knowledge to predict if exposures are likely to change.
Even with all the technology and data available, underwriting will always rely on the human experience.
Many insurance segments, such as E&S, have their own unique underwriting requirements. When writing a policy, E&S underwriters can look at real-time developments and feedback on past losses to allow better risk decisions and course-correct in real-time. Underwriters can create an overall information advantage and enable broader strategic goals over time.
The Human Touch in E&S Is Critical
E&S lives in a poker universe where there are many variables to what cards can be played, and there is always a risk when the cards are laid down on the table. E&S carriers have all the usual industry data to narrow down policy discussions, but ultimately, they do not have all the data that underwriters need to properly write a policy to the individual’s risk.
That is where the human touch comes in.
In the E&S market, each client scenario can be different and human judgment is often required to figure out the best way to communicate, manage and settle issues most effectively for the best overall customer experience.
Technology can be used for enhancing customer relationships, but it can’t take over the crucial component of the human touch. &