Reimagining Underwriting: 5 Tips for P&C Insurers
Last year proved to be a challenging period for insurers across the board. From increasing litigation and inflationary pressures to a persistent hard market impacting multiple lines, the industry faced a multitude of obstacles. AM Best’s decision to maintain the negative outlook into 2024 for personal lines underscored the severity of the situation. Amidst these difficulties lies an opportunity for insurers to reassess their processes, reduce costs and build resilience in 2024. In this blog, we will explore ways that P&C insurers can address these challenges and future-proof their business.
5 Tips to Build Underwriting Resilience in 2024
1. Audit Operating Costs
With Motor Vehicle Records (MVR) now averaging over $11, it is an excellent time to closely examine operating costs, particularly related to policyholder acquisition. Some helpful questions to ask are:
- What was the overall MVR expenditure last year for new and renewal business?
- What are the projected expenses for this year?
- How do you measure the ROI for MVR purchases, and is it meeting your target?
- How does that compare to our goals?
Many insurers reflecting on these questions will realize that they’ve spent an exorbitant amount on MVRs and may still have limited visibility into the actual risk within their book.
If you find this to be true for your organization, consider introducing new data sources that can provide insight into a driver’s risk factors at a lower price point. This is an effective way to balance costs for different stages and use cases.
Insurers leveraging SambaSafety’s data solutions can save up to 60% on MVR fees without sacrificing visibility into the underlying risk. Download our infographic to learn more.
2. Audit Your Underwriting Workflows
J.D. Power’s Shopping List Report notes that the consumer shopping rate slowed in Q4 of 2023, making it a good time to evaluate underwriting processes and find ways to optimize workflows. Questions to ask during this evaluation process include:
- What triggers or criteria are in place for purchasing an MVR or using external data sources to assess risk for new business?
- How does that compare for mid-term reviews and renewals?
- What changes can be made to improve pricing precision without adding cost?
At this step, you may find that you lack a consistent process for assessing risk at certain stages of the policy lifecycle. In commercial lines, instead of pulling a random sample of drivers for MVRs, consider using third-party data to pinpoint exactly which drivers have activity on their record. This approach allows you to reduce costs and ensures greater precision in pricing new business.
Post-bind, many insurers are providing continuous monitoring and training services to their commercial policyholders as part of their risk control suite. This method provides a solid approach to ensuring greater visibility into your book and gives fleets the tools to mitigate risks, leading to a 22% reduction in violations and 14% reduction in crashes.
3. Audit Your Ecosystem
The right tools and partnerships can significantly impact an insurer’s ability to achieve their goals. It’s important to assess your ecosystem and ensure you have the right partnerships in place. Ask the following questions to assess their ability to meet your needs in today’s market:
- Are your current tools flexible and able to support you as your business evolves or when priorities change?
- Do you have the right tools in place to help you achieve your goals?
- Are your current partners investing in areas that align with your strategic priorities?
- Would a new partnership balance areas where you lack expertise or resources for larger initiatives?
In this step, insurers should also look at any resource limitations they have to be able to support larger strategic priorities, like instituting a commercial auto telematics program. This work can be very complex and is one area where an insurer would benefit from partnering with an experienced leader in telematics aggregation, like SambaSafety.
4. Audit Your Book
Point-in-time assessments at new business and each renewal can no longer be the approach. Insurers should evaluate the risk within their book of business and how it is evolving. Questions to ask include:
- What are leading indicators of risk within your book of business?
- What tools are available to assess risk in between policy periods?
- Did you experience an increase in fraud over the last 12 months?
- Did you experience an increase in losses over the last 12 months?
This review may lead to additional process improvement opportunities. If you have experienced an increase in fraud, additional research may be needed to determine patterns. Following up with an action plan to address any gaps will be necessary. If you find that your processes are more reactive and you have limited tools to easily assess the overall health of your book, you may benefit from continuous monitoring of reliable driving data sources like MVRs, CSA and telematics.
Understanding the risk within an insurer’s book is essential for effective risk management. The ecosystem of tools and partners that you have cultivated should support this work, making it effortless to monitor regularly. SambaSafety’s Portfolio Insights provides an overall view of risk within an insurer’s monitored portfolio, and the ability to drill into concentrated pockets for proactive consultation at the policyholder level.
5. Strengthen Cross-Functional Relationships
A final area where insurers can build resilience is by breaking down siloes and strengthening relationships between functions like Underwriting, Risk Control and Special Investigations Units (SIU). This is crucial for mitigating risks effectively. To assess how well your organization does in this area, ask the following questions:
- Are feedback loops in place to communicate when changes are made or issues arise that impact other units?
- How often do Underwriting teams meet with Risk Control, Claims and other business units?
- Can you deliver critical risk data across functional areas that is easy to consume and interpret?
Insurers that are able to effectively create a cohesive and aligned structure will be better positioned to support their enterprise risk management objectives. Risk Control and SIU teams can share insights into early risk indicators that may help underwriters improve processes upstream, increasing agility of resolution and reducing future risk. As the teams work more closely and effectively this healthy collaboration will improve their overall performance.
Conclusion
In the face of unprecedented challenges, insurers must adapt and innovate to thrive in 2024 and beyond. Embracing new data sets, such as telematics and connected vehicle data from policyholders, can provide insurers with a competitive edge.
By implementing the five tips shared above insurers can build resilience, improve efficiency, and navigate the evolving insurance landscape with confidence. Now is the time to seize opportunities for growth and transformation in the insurance industry. SambaSafety’s data solutions offer flexibility, automation, and cost savings, enabling insurers to leverage emerging data sources and stay ahead of the curve.
Download our infographic below to learn how you can balance costs throughout the policy lifecycle.