Will Technology Replace Underwriters?
The future for insurance underwriters doesn’t look rosy, according to employment forecasts. While many jobs are experiencing growth, employment in this career is falling on an annual basis and is forecast to decline further during the next seven years.
Technology and automated solutions are reducing the need for humans to evaluate insurance applications, according to the U.S. Bureau of Labor Statistics (BLS), though the agency notes that there will still be a need for underwriters to evaluate automated recommendations.
Insurance underwriter was listed as one of the “10 most endangered jobs in 2015,” according to Forbes, citing data from the BLS that forecasts employment in the role is expected to fall by 6 percent between 2012 and 2022 , from 106,300 insurance underwriters in 2012 to fewer than 99,800 in 2022.
Insurance underwriter was listed as one of the “10 most endangered jobs in 2015,” according to Forbes.
It’s a stark contrast to the projected 13 percent growth in business and financial operations occupations and 11 percent projected growth for all occupations the bureau tracks.
As the recent Swiss Re and IBM partnership indicates, insurers are increasingly adopting underwriting processes that rely on data and software solutions.
Those two companies announced they’re developing a new range of underwriting solutions that rely on the cognitive computing technologies of IBM’s Watson.
As insurers take advantage of technology, underwriters no longer have to engage in mundane tasks, allowing them to become more efficient and handle more accounts. But, that reduces the need for as many human underwriters.
While the role of humans may be diminished, there will always be a need for knowledge and a face to cultivate relationships. — Stan Galanski, president and CEO, The Navigators Group Inc.
Stan Galanski, president and CEO of The Navigators Group Inc., in Stamford, Conn., said technology is changing the underwriting process by allowing more access to data in real time.
Underwriters, he said, can use company-issued iPads to access metrics about the performance of their portfolios that would have required “more actuarial work” in the past.
While computer data and analytics now dominate “commodity underwriting” for things like automobiles and BOP policies, however, he said, there’s still a strong need for specialists to handle coverages such as ocean marine and construction.
While the role of humans may be diminished, there will always be a need for knowledge and a face to cultivate relationships, he said.
“We firmly believe that people do business with the people they know, like and trust. Specialty insurance underwriting is still a people business that remains relationship-driven,” he said.
John Peters, executive vice president of commercial insurance and operations at Liberty Mutual Insurance in Boston, agreed that “it’s likely that the total [underwriter] count is going to go down” as the changes brought about by technology continue to change the job of insurance underwriter.
Most consumer insurance underwriting continues to be done by sophisticated technology with little human involvement, he said, forecasting that the trend will continue to make inroads in the commercial world.
“Yet for mid-sized and large accounts, an underwriter’s judgment will still be important,” Peters said.
Gail McGiffin, principal at Ernest & Young, said in a 2014 report that the role of underwriters will “significantly change” as insurers modernize their operations.
The report projects that underwriters of the future will be more like sales executives, data scientists, innovators and customer advocates. Underwriters who do remain in the industry will deal less with linear processing to quote policies and more with strategic engagement in areas such as innovation, product development and customer experience.
“Yet for mid-sized and large accounts, an underwriter’s judgment will still be important.” — John Peters, executive vice president of commercial insurance and operations, Liberty Mutual Insurance
“The focus [of insurance underwriters] will shift away from internal processes and specific transactions and emphatically toward market-facing relationships and sales,” said the report.
For those in the commodities end, Galanski said, there is a risk of job decline for underwriters.
While the jobs may not go away, the roles and responsibilities may change. “[Technology] has fundamentally changed the job of the underwriter to become more of a portfolio manager and marketing representative,” he said.
The best way for an insurer to remain profitable is to maintain a disciplined underwriting culture, Galanski said. That calls for having a strong underwriting strategy and philosophy, and while that can be driven by data, it’s optimal when “the underwriter is making the decision and not blindly following a pricing model or algorithm.”
While technology is partly reducing the demand for underwriters, the potential jobs losses may be offset by a shrinking talent pool in the industry, Peters said.
The population of insurance employees, he said, is shrinking faster than insurers can bring new talent into the industry. While technology may lessen the need for some underwriters as we know them, those individuals will likely transition to other jobs in the organization.
Most insurers simply can’t afford to let go employees with industry knowledge and experience, Peters said.
“I don’t expect you’ll see dramatic drops in the numbers of underwriters. You won’t have big cuts. Some will do other things and take different roles. They need people with that knowledge,” he said.