Underwriting has always been defined as the process of evaluating risk. Through this process an Underwriter can determine the risk profile, the various covers and product offerings required. As well as the risk mitigating factors to take into account when pricing the risk in return for a premium.
When we look at the world around us, we see constant change in every sphere of our lives. We see Globalisation, we talk about technology as the 4th revolution, we continue to see more and more natural catastrophes, but do we see a change in Underwriting?
Why Underwriting Remains Important in Insurance?
It is difficult to predict how the legislative landscape will change the Underwriting fraternity. No matter which way you view and in which direction you steer the future of the Underwriter, underwriting will stay.
Underwriting forms the basics of the risk foundation for each policy for any line of business that is issued. If the basic fundamentals of underwriting are not applied, then none of the following will be possible:
- Contract certainty
- Risk understanding and proper advice
- Providing correct cover
- Burden free claims settlement
Will Automated Risk Underwriting Replace the Underwriter?
No technology will be able to replace the intuition and experience of an Underwriter when underwriting a risk. Although algorithms are developed by carefully applying underwriting tools, and risk methodologies. The manner in which underwriting is applied and delivered to the market has changed compared to traditional underwriting.
The world is constantly evolving. This presents an opportunity for an Underwriter to learn more about our environment, infrastructure, technological and political changes. Expanding our knowledge on these factors will up-skill ourselves in new risks, mitigation factors and legal implications. Resulting in the way and form in which we provide risk management and underwrite insurance.
Millennials Are Shaping The Future of Underwriting
I will support views on the future of underwriting. Where the insured will determine what he wants included in his insurance package and at what price. Taking into consideration the make-up of the new millennials and their view of commoditised valuables, it is understanding, however in this case I believe the role of the underwriter will be reversed. Consider the following scenario; a shop assistant that weighs a basket of food for a customer and charge them per weight. In a similar manner will the underwriter take the insurance selected basket and decide if they want to weigh the basket and to attach a price in return for payments. Which brings us back to the Underwriter determining the offering/demand, and if the price is sufficient in covering the potential risk.
The Role Underwriting Plays in Society
Underwriting also fulfils a much larger role in society. Underwriters are in the forefront to learn more about technologies, environmental changes, political affiliations and threats. We have to forecast the impact of these factors on risk rating and claims and at the same time provide guidance, transfer skills and consistently introduce new product offerings to remain relevant with the evolving world we live it.
With a better understanding of the new environments risk rating changes and insureds in future might see insurance premiums been presented in very different form.
The role of the underwriter will continue to make sure that contract certainty exists and that when a loss needs to be indemnified that it is done with the intention and the knowledge that both parties entered into a contract of certainty. Certainty on what is covered, how it is covered and for what circumstances.