Technology Deficiencies Hamper Commercial Underwriting Progress — Accenture Survey

An Accenture survey of commercial underwriting executives reveals a clear picture of the industry’s belief in the potential of technology, as well as stubborn impediments to realizing its full potential contribution.

(More than half of the respondents to Accenture’s U.S. Commercial Underwriting Survey said that, while technology has lifted underwriting quality, it has increased their workload, due to the lack of data and process integration, plus insufficient training.)

 

Commercial insurers are nearly unanimous in their belief that technology investment will increase the quality of their underwriting, but lack of data integration and technology training continue to limit underwriting productivity and efficiencies, an Accenture survey of 559 U.S. commercial underwriters reveals. The survey, undertaken in June and published Nov. 2013, polled senior underwriters, department or product managers and other underwriting executives.

Ninety-three percent of respondents to the survey agreed that technology investment was the best way to improve underwriting quality, and 60 percent affirmed that technology has significantly improved underwriting performance. However, more than half (54 percent) said that technology has also increased their workload, principally due to the lack of data integration across their companies (the cause cited by 81 percent of respondents). Other major reasons for increased workload included lack of process integration (67 percent) and insufficient training (57 percent).

John, Mulhall, Accenture.

John, Mulhall, Accenture.

“There is no question that technology has brought a step change in the quality of insurance underwriting in recent years,” comments John Mulhall, a managing director in Accenture Property and Casualty Insurance Services and the management consulting lead for insurance policy services offering in North America. “But the full benefits of technology investments in terms of productivity and efficiency cannot be achieved without broader data and process integration across the organization.”

Commercial underwriters face a range of challenges in evaluating risk, including difficulties in obtaining historical, market and claim information while pricing the risk, disconnected account information, and unnecessarily complex communication channels, according to Accenture Property and Casualty Insurance Services managing director Michael Reilly. “Underwriters must often re-enter data to and from multiple systems and must rely on an employee base that is subject to turnover – and also with many of the most experienced underwriters nearing retirement,” he asserts. “Automated underwriting systems offer the promise of better information and greater efficiency through the reduction of re-working and errors.”

Respondents to the Accenture survey said that they will pursue improvements in underwriting effectiveness by investing in process automation (57 percent), predictive analytics for risk evaluation and pricing (51 percent, and external data to evaluate risk (51 percent).

Carriers should consider investing in measures to improve underwriting effectiveness before a soft market cycle fully manifests itself, according to Accenture’s Mulhall.  “Softening rates and rising expense ratios will expose inefficiencies hidden in a more favorable market,” he says. “Carriers that invest effectively in data, tools and technology to improve underwriting accuracy and efficiency rather than just adding another tool to the process, while managing their strategy through market cycles will separate themselves from those unable to keep up.”

The Accenture survey’s primary areas of focus were commercial lines (68 percent), specialty lines (23 percent) and reinsurance (9 percent), according to an Accenture statement. Among firms surveyed, 26 percent had net premiums written greater than $1 billion; 29 percent had net premiums written between $500 million and $1 billion; 24 percent had net premiums written between $100 million and $500 million; and 21 percent had net premiums written below $100 million.

Other key findings of the survey include:

  • More stringent regulations are seen by underwriters as having the most significant impact on their function in the next three years, cited by nearly three out of four respondents (73 percent).
  • Maintaining underwriting and pricing discipline is the top challenge for underwriters to achieve their business objectives, mentioned by nearly three out of four respondents (72 percent).
  • More than half (58 percent) of respondents say speed to market is the most important goal driving investments in underwriting capabilities. However, more than seven out of 10 respondents (72 percent) indicate that it takes their organization six months or more to launch a major new product.
  • More than three-quarters (77 percent) of underwriters say their organizations have already implemented, or are implementing, or are planning to implement mobile technologies for customers and for agents.

Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at [email protected] or (503) 936-2803.

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