Underwriters evaluate risk for mortgage, insurance, loan, or investment companies. They use specialized knowledge and professional judgment to decide whether an applicant should be approved or denied.
Leading insurers embrace and embed exponential capabilities into their underwriting function while equipping underwriters with the skills to monetize these opportunities fully. They achieve this by establishing five essential building blocks and four critical enablers.
Risk Assessment
Risk assessment involves reviewing and evaluating application paperwork to determine creditworthiness (mortgage, insurance, loan) or financial soundness (investment), among other aspects. The exact details vary depending on the type of business in question. The decision to approve, reject, or decline the application is made.
The underwriter must consider all relevant information to decide, including medical records, credit history, driving record, etc. The underwriter must also assess a range of other factors, including the risks’ severity, degree of control, and likelihood of occurrence. Insurers increasingly leverage digital solutions to help them perform the underwriting function more efficiently and accurately.
This allows underwriters to re-deploy their talents and focus on more complex tasks, such as creating custom policies faster, improving price-setting accuracy, and boosting customer satisfaction. Insurers that retrain their underwriting workforces to be exponential and utilize new data and technology will benefit from creating a virtuous cycle that drives efficiencies, profitability, and sustainable growth.
Some underwriters are concerned that emerging technologies will replace them, a concern that is unlikely to be fully justified. However, underwriters need to take a structured approach to underwrite transformation and be intentional about their efforts to become deal-makers, risk detectives, and portfolio optimizers. In addition, they should ensure they have access to the right tools for their underwriting transformation journey to remain competitive and effective.
Pricing
Once an underwriter has assessed and approved a risk, it is time to price the policy. At this stage, the underwriter must determine the coverage amount and terms, such as the maximum benefit, deductible, and co-pay. In addition, they must ensure the policy complies with legal requirements and regulations. This is a crucial step to avoid unforeseen risks or liabilities caused by a poorly structured policy.
With the right platform, underwriters can streamline submission intake, automatically triage new business submissions, and focus on high-value strategic initiatives. They can also use intelligent automation to process data more quickly, increase initial response times, prevent underwriting leakage, and free up their capacity to write higher business volumes. Using natural language processing and machine learning (ML) to sift through unstructured insurance data, they can also automate and prioritize high-volume, repetitive administrative tasks.
Insurers must be intentional about building and enabling exponential underwriting capabilities. This includes having a multidimensional human capital strategy that recruits and attracts a variety of skill sets and backgrounds. They must also be prepared to use nontraditional workforce models to access hard-to-find underwriting talent. Finally, they must be prepared to invest in underwriting transformation projects that align with four primary areas of the organization – strategy and governance, data and analytics, technology, and culture and talent.
Underwriting Decisions
The underwriter has the ultimate say over whether a financial product is approved or denied when it comes to mortgages, loans, insurance, or investments. They use their specialized knowledge and expertise to assess customers’ credit and risk factors before deciding if an application will be accepted, declined, or offered with specific terms.
This role requires a mix of hard and soft skills. It also involves evaluating market conditions and trends to make strategic judgments that affect underwriting capacity and performance. Underwriters must also be able to manage and maintain broker and client relationships and keep coverage and pricing realistic in a competitive market.
Underwriters also review unusual or high-value assets, such as fine art collections or vintage cars, which often require a more nuanced approach than standard policies. They may be required to research and gather vast information before deciding.
By leveraging AI, underwriters can move from hindsight to foresight by automating their routine tasks and freeing up their time to process complex and high-value cases that require expert professional judgment. This is how they can transform into exponential underwriters, multi-tasking as both technology trailblazers and data pioneers to drive the best decisions for their clients and business. By streamlining the submission intake process and automatically triaging submissions, insurers can improve initial response rates by up to 40% and boost quoting capacity by 50%.
Customer Service
Underwriters are essential in ensuring fair and stable market conditions by vetting the risk of each transaction. They do this for debt instruments such as mortgages, loans, insurance policies, investment securities, IPOs, and bonds. By evaluating an applicant’s credit history, employment and asset details, medical records, and other vital data points, underwriters can decide whether to approve a loan, issue a policy, or limit the coverage they will offer.
Traditionally, the underwriting function has been supported by agents or brokers who are responsible for selling the product, gathering customer data, and submitting it to the underwriter for evaluation. Often, they will then relay the underwriter’s decision to the client.
Achieving the next level of underwriting performance requires comprehensive capabilities encompassing hard and soft skills, qualitative judgments about future industry performance, and rigorous portfolio management to avoid markets where even the best underwriting cannot compensate for unfavorable conditions. This requires a digital underwriting workbench that supports today’s workflow and process yet is flexible enough to support transformational technologies and new data sources. Majesco Digital Underwriter 360 is a next-gen, insight-driven underwriting platform for commercial and specialty insurers that provides a seamless, end-to-end view of the underwriting process and intelligently connects data with various tools, spreadsheets, rating engines, analytic models, and more.
