As I discussed in the previous blog of this series, new and innovative ways of gathering and leveraging data are transforming underwriting. But your ability to capitalize on this data-driven transformation will be limited if you cant find well-educated and motivated people who can and want to become the next generation of insurance underwriting professionals.
Where will you find your underwriters of the future, and who is your competition for this talent? Once you hire them, how will you make sure they stay in the profession? These are serious questions for insurers as the industry takes advantage of emerging digital technologies such as predictive analytics, AI, the Internet of Things and social media to transform underwriting. Yet, even as the underwriting function becomes faster and more precise, insurers advantage in this area may be challenged by new players including data-savvy digital players such as Amazon, which is now selling its own purchase protection insurance in the UK that are building detailed insights about customer behaviors and risks.
Previously, insurers were somewhat protected because it took a lot of capital and managing many a regulatory hurdle to operate as an insurance company. That hasnt changed significantly, but today, there are more players that have the ability to draw on deep pockets to create an insurance type of market. In 2015, venture capital and equity funding totaled $2.65 billion in annual funding in the insurance space, according to CB Insights.
Walmart, which has experimented with selling health insurance in its stores, and Google are examples of companies that have significant capital and substantial data or analytics that they can leverage to disrupt existing insurance business models. Even though Google shut down its Google Compare insurance rate comparison service earlier this year, it is likely to learn from the experience and re-enter the insurance business in some way in the future. The competition is shifting from a focus on traditional insurance companies to now include entities such as technology companies, peer-to-peer, social brokers and large businesses that cater to the consumer market. These entities are looking to leverage their deep customer insights to build new revenue sources, and focusing on insurance as one key area to expand.
The battle for talent
But you wont be competing with these new players solely to win customers. Youll also be competing for the professionals who represent the potential next generation of insurance underwriters. As with many functional areas within insurance organizations, underwriting is being affected by the aging of seasoned professionals. After the eventual departure of these senior underwriters, who have anywhere between 25 to 35 years of experience, there is a dearth of underwriting talent in the next tier those with 10 to 15 years of experience, as well as entry-level underwriters.
It has gotten harder and harder to attract people to the underwriting profession. Some of that actually is due to the impact of digital capabilities. Forbes listed insurance underwriter as one of the 10 most-endangered jobs in 2015 largely because of the increased impact of technology and use of automated underwriting systems.
To overcome these obstacles, you will have to widen your recruiting at universities and other sources. Widen the funnel beyond the traditional risk management programs and look at degrees that have a concentration on analysis, such as accounting, finance, engineering, and so on.
Once youve hired the next generation of underwriting professionals, you must define an exciting career path including paths into and out of underwriting, such as risk engineering or claims. The key is to nurture and retain this talent part of the challenge is that we dont retain them.
The impact of specialization
The good news is that these professionals will be working more collaboratively than ever before something that has both benefits and challenges for insurers. To some extent, its a consequence of the increased specialization we are seeing in underwriting where underwriters specialize in a particular line of business, or on distinct vertical markets such as technology or construction. As insurers develop more specialists, the number of contact points within the company for each client increases, and the role of coordination becomes bigger and harder.
There are tools that address this challenge; we are seeing interest in leveraging these tools to break down the walls impeding communication that would otherwise exist among underwriters and other account team members. This kind of collaboration is just one aspect of underwriting that has been significantly improved by technology.
However, most insurers will need to step up their game to attract and develop the kind of digital-savvy underwriting talent necessary to keep them competitive in the future marketplace.