Persistent climate, economic, and geopolitical instability are shedding new light on the importance of rethinking traditional underwriting models. Underwriting was relatively sidelined during the first wave of InsurTech innovation – startups remaining strictly growth-focused and incumbents largely moving out of difficult markets rather than tackling the more complex risk landscape head on. Now, incumbents and startups must be refocusing their efforts, finding new ways to maintain excellence and competitive edge within a chaotic and fast-shifting risk landscape that is here to stay. That means making a significant investment in artificial intelligence (AI), data science, and other digital technologies in order to adapt to a changed and changing world.

The bureaucratic processes that have typified underwriting for years include much repetitive and time-intensive work, like research and data entry. And P&C underwriters have traditionally made use of their vast trove of historical data to manually evaluate and quantify risk. However, today’s risk landscape has changed, and requires a very different approach. 

A recent BCG report highlighted the ways economic turmoil, supply chain disruption, and unending climate catastrophes should push P&C incumbents and startups to consider creating underwriting models that are insight-driven and proactive, rather than opaque and reactive. 

And, fortuitously, recent innovations in generative AI, wearables, and other connected devices, are presenting underwriters with the kinds of tools they need to make this much needed transition – analyzing complex risk with never-before-seen speed and precision and freeing them from the weight of their slow-moving legacy operations.

And while technology has the potential to act as a key competitive differentiator for the industry – from driving profitability through analytics and proprietary tech, to providing superior client and broker experiences, to more accurate risk assessment – adoption of that technology isn’t a given. In fact, early adopters of AI-driven tech will have a sizable head start when compared to those companies who are slow to change legacy processes. 

Digitalization and AI have transformative potential for many areas of underwriting, creating new value propositions for P&C insurers. AI and data science are helping process enormous data sets and develop insights in a way that far surpasses conventional methods. Adoption of the right underwriting tools and platforms, for example, could enhance and streamline core processes and workflows, freeing up human talent to focus less on administrative tasks and more on customer relationships and personalized services. 

Similarly, recruitment and retention of talent with expertise in emerging tech will be another area of key differentiation within the industry – creating opportunities for training and upskilling existing employees and hiring new talent.

Competition in P&C will remain fierce, with challenges coming from new places – widening an already crowded playing field. Auto manufacturers, as one example, have already  entered the fray, looking at ways to use their proprietary information around vehicle safety systems and driving patterns to launch their own insurance products.

Bottom line: future excellence in underwriting will require a significant technology investment and operations overhaul. Underwriters need to stay focused on the core of their business by embracing advanced data science, adopting AI to improve operating efficiencies, attracting and retaining tech talent, and servicing their customer base better. That also means staying engaged in matters of sustainability, particularly as the changing climate and resulting crises will require new and innovative risk management products and protections. Overall, this is an enormous opportunity for those incumbents and startups willing to meet the challenges of the moment with the right combination of human and machine intelligence.