There have many recent articles highlighting growing automation in all industries and the loss of jobs that will follow. The insurance industry is no exception and seems to be fully in the firing line. One well publicised article in the Sunday Times put ‘Insurance Underwriters’ at the top of the list, with a 98.9% likelihood of becoming automated. Given this conclusion, a balanced and impartial commentary might be difficult, but we’ll give it a go.
Technological efficiencies absolutely have their place, and automation has transformed the way in which most of us in the industry interact and transact. There’s no doubt that the customer has benefitted from expense and efficiency gains as a consequence, particularly on homogenised, relatively low value products. However, automation of underwriting seems to have become seen by many as something of a panacea and is developing for increasingly larger, more complex products. There’s also a view that new, and existing, market participants can improve on 300+ years of expertise and principles simply by throwing cash at automation and e-underwriting to provide ‘answers’ to questions that nobody seems to have asked.
This throws up a number of interesting dynamics for our consideration:
- We must ask whether automation might deskill the industry. Automation and rules based underwriting leaves little room for subjective assessment, intuition and judgement, key skills developed over many years. Will automation dilute the existing skills base and choke the supply line for the future?;
- Insurance, and particularly financial lines insurance, is not a commodity product. It’s a heavily regulated, service-led process where the ‘product’ is a complex and detailed contract, which has to be right for the purchaser. Whilst it is possible to standardise a product, standardising the underwriting is more difficult to achieve, militating against automation;
- On more complex products, who gets the bigger benefit and who is driving the automation argument? Is it a supply-led dynamic?
The big fear is that automation and standardisation detaches underwriters from their brokers. Why hire and train new underwriters when the same money can be spent on technology and systems to do the same job? And simply transplanting the knowledge of experienced underwriters into a system further distances that resource from the point at which it has the most value, with the brokers.
No-one wants to be surplus to requirements, but there’s a risk that some of us might be if we don’t question and change the direction of travel. Processing platforms may have a place for some financial lines business at the smaller end, and it most certainly delivers enormous benefits from a back-office perspective, but it can’t replace skills and knowledge developed over many years and delivered in the way it arguably should be. Accessible underwriting expertise and flexible solutions can’t be automated. As Albert Einstein once said – “I fear the day that technology will surpass our human interaction. The world will have a generation of idiots.”
So, there you go, a balanced and impartial view from MPR. Please feel free to pick up the phone to us, we’re always here.