Automated underwriting is a ‘huge opportunity’ for the insurance industry – Ki

Algorithmic underwriting, also known as automated underwriting, is a huge opportunity for the insurance market.

This is according to James Birch, head of innovation and development director at follow-only digital syndicate Ki Insurance, speaking at a webinar yesterday – Netcall and Acord’s Unlocking the Power of Data.

“It allows insurers to automatically analyse risk, offer more personalised products and serve more customers globally in a matter of seconds,” he said.

Birch explained that an algorithmic-led strategy means taking an approach that is data-led.

This is what Ki is trying to tackle in the market as it seeks to address how to remove the duplication of manual tasks, eliminate being document-led and reduce the cost base.

Still a physical marketplace

Despite Lloyd’s of London launching its virtual underwriting room this year, it is still very much a physical market, according to Alex Wilson, innovation manager and development lead at Ki.

“It’s amazing when you walk into the building and you are surrounded with 300 years of history, with men and women walking around in suits with binders full of policies that they are trying to place and waiting patiently at the box to see underwriters.

“It’s enchanting and shocking at the same time that the largest insurance marketplace in the world operates in this very document-led and manual fashion, where underwriters are required to manually process risks and key data into pricing models and rekey that same data into policy administration systems.”

Only half the problem

Wilson pointed out that over the last 40 years, expense ratios for insurers have barely changed. To correct this, he reckons that insurers and brokers should look to standardise the way they capture, structure, ingest and process data.

Lloyd’s of London’s Blueprint Two has partially addressed this in its core data record, but he believes this is only half the issue as it focuses on post-buying and updating contracts instead of structuring data for capture and submission.

“While this alleviates some of the administrative burden it does not address the need for capturing data at the point of submission, which is crucial for reducing cost in a document-led market,” he added.

Ki has addressed this and it is currently developing suite of APIs and partnering with gateway providers to ingest data from brokers, electronic placement platforms and third party data providers in a bid to increase the data points it collects and reduce the number of steps for brokers.

This, he said, could provide brokers with a differentiated customer service as it will prevent them from rekeying data on different platforms, which is time consuming.

But Wilson said that this is only the first step to digital transformation, citing open banking as having applied data sharing successfully.

“For insurers and brokers to maintain their competitive edge and harness this new world of data, they need to develop the ability to share, ingest and subsequently process this data,” he added.

Wilson said that if insurers and brokers can embrace this API approach, they will be able to partner with insurtechs looking to provide technology for the Lloyd’s market and this will help firm digitalise without having to replace legacy systems.