The level of insurance company employees fearing disintermediation from technology has been steadily increasing since the first policies were sold online, and now the discontent has spread to the underwriting practice.

Though predictive analytics is becoming more commonplace among insurers, according to a Valen Analytics survey, underwriters’ adoption of the tools is a ‘significant’ or ‘high concern’ of 82% of respondents.

Underwriters believe that their experience is more valuable than a predictive score when assessing risk, 24 percent of respondents said. A further 25 percent said they were concerned that underwriters believe predictive analytics will replace their jobs entirely.

“Concerned about adverse selection and inadequate pricing, an increasing number of carriers are investing in tools to help them make better decisions as they focus on growing their book of business,” said Karlyn Carnahan, research director of Celent. “However, successful implementation of predictive analytics will require not just tools, but an emphasis on leading the organization through change management. This requires a mix of cultural and organizational focus along with technical acumen.”

Despite this tension, 45 percent of the 39 respondents to the survey said they have begun implementing predictive analytics in the past two years. More than half said they will begin planning within a year.

[Big data helps insurers speed underwriting process]

However, nearly 40 percent of insurers don’t believe their company is doing an effective job in presenting their underwriting strategy and results to ratings agencies and many remain hesitant to use predictive models. More than 80 percent said predictive analytics has a moderate to significant impact when rating agencies evaluate their underwriting performance.

Other highlights from the report:

  • 75 percent said technology companies such as Google will disrupt distribution channels in a very significant way 61 percent said technology companies will begin impacting commercial lines within the next five years
  • 68 percent said they face a talent recruitment issue, finding it difficult to enlist the caliber of candidates needed to fill key positions
  • 75 percent rank loss ratio reduction as the top result they need from underwriting analytics

“The need to implement predictive analytics in underwriting is becoming more widely recognized by insurers, but these findings show why organizational buy-in is key to its success,” said Dax Craig, CEO of Valen Analytics. “In order to achieve predictive modeling goals, underwriters as well as actuaries, executives and training teams need to be a part of the discussion pre-implementation, and be educated on how the model will be making their jobs easier, more efficient and effective.”
Insurers are focused on new distribution channels, according to the survey, followed by ‘expanding new territories’ and ‘new products/lines of business;’ 75 percent also said technology companies such as Google will disrupt agents in a very significant way. Only 3 percent said they will have little to no effect on agents.

This article courtesy of Information Management's sister media brand, Insurance Networking News.

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