New age Underwriting

BY: ILDIKO RICHARDSON, Head of RisQ, a division of Infiniti Insurance Limited

Are we loosing the art of underwriting?

Sound underwriting has always been at the heart of the insurance industry. The industry would simply not exist without the ability to evaluate and accept risk at the correct price before issuing policies.

It is no wonder, then, that many past insurance industry notables and company executives came up through the ranks of underwriting. Underwriters have traditionally been viewed as the people whose responsibility it is to put the surplus on the bottomline and define the company in the marketplace.

As insurers look at large-scale and transformative investments in their business capabilities, many are finding it difficult to continue to pay adequate attention to underwriting. Ildiko goes onto say that there is widespread consensus that the role of this central function can — and must — significantly change if insurers are to modernize their operations and infrastructure to meet rising broker, business owner and consumer expectations.

Traditional underwriting, once considered the very heart of the insurance business, appears to be losing its opportunity to define its future and regain its central place in the insurance industry. Underwriting leaders should reposition themselves as higher profile strategic influencers and decision makers, roles they have traditionally played, but in which they have lost ground in recent decades.

This is never more so evident than in the liabilities sector of the industry. Looking more specifically at the new age Environmental Impairment risks recently added to this sector of the insurance spectrum, South Africa have taken a quantum leap from little or no cover for environmental risks to full cover with little understanding of such risks and no or limited historical underwriting data. Clients and brokers have discovered that the limited and restrictive covers that have traditionally been the accepted norm, no longer adequately protect clients due to ongoing changes in legislation.

These legislative changes have left many clients with large bills to pay or having to resort to litigation to ensure that their exposures are adequately covered by their policies. A level of uncertainty has therefore been prevalent as traditionally these environmental risks were not rated as they were understood by Insurers to be excluded from the ambit of any insurance cover yet clients and brokers felt that they had sufficient cover to meet any environmental eventuality. Now this very real uncertainty is coming to the fore and brokers and clients are now rightly demanding a solution. Insurers are being challenged to create a suitable response to these shortcomings within their current product offerings. Underwriting in the case of environmental liabilities is also about clearly understanding the constant changes to legislation which add to the need for tailor made environmental liability products.

So where does that leave us today? And what is the path forward? Powerful new technologies and actuarial rating engines have automated many of the relatively low-value transaction processing tasks so that insurers and brokers can focus their attention on higher-value relationship building and on creating tailor made solutions. Underwriting can — and should — more effectively support and engage with the full market-facing ecosystem of insurance operations.

Underwriters can add value at every phase and interaction within the insurance continuum by helping to facilitate sales, strengthening existing relationships through creative servicing enhancements, technical inputs and creating awareness of the changes of market influencing factors.

Aligning these specialist covers with specialist divisions or UMA’s to ensure the client gets the benefit of that expertise is of paramount importance in this New Age of Insurance.

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