Firms’ top and bottom lines will be dented, alongside staff headcount, if adaptation to the changing skillset climate is not achieved

Underwriters must have a more diverse set of digital analytical skills if insurance is to meet the needs of consumers and businesses in the future, a report by the Chartered Insurance Institute’s (CII) 2021 Underwriting New Generation Group has concluded (1 August 2022).

For insurance to be successful, the report states that future underwriters must become skilled statisticians, engineers and technologically literate.

The ramification of failing to adapt to the changing skillset climate, according to the group, will likely see the loss of staff – alongside businesses’ top and bottom line being impacted.

“With the increase in use of data, we are seeing a shift from underwriters being expected to detect and repair to consumers and businesses wanting the profession to help them predict and prevent risks,” said CII’s interim chief executive Jonathan Clark.

This builds on the traditionally required skills of underwriters, which were purely analytical in nature – with most candidates possessing science, technology, engineering, mathematics (STEM) business or economic degrees.

Considering this shift, CII’s 2021 Underwriting New Generation Group member Marcus Li, senior strategy associate of Aon Inpoint, said: “The requirement and demand for professional skills have not diminished, but rather augmented, becoming perhaps ever more important.”

Speedboat versus the oil tanker

If the underwriting profession is to keep pace, the group claims that insurers need to make targeted investments to enable the migration to a technology stack that can support a two-speed IT architecture, alongside programmes focused on talent acquisition and upskilling.

According to McKinsey Digital – part of consulting company McKinsey and Company – this architecture helps companies develop customer-facing capabilities at high speed while decoupling legacy systems.

Given the challenges around recruiting suitable candidates, however, the research suggests that splitting underwriting responsibilities may be beneficial – differentiating between technical and trading or development roles.

New and existing underwriters, meanwhile, should adapt and develop new skills alongside their core underwriting abilities to effectively collaborate with data specialists – this includes the understanding and use of pricing models, data analytics, portfolio management and data manipulation.

Li said: “Underwriters need to be empowered with the ability to interpret data they either were not able to or did not have access to previously.

“Up to 30% of underwriting roles could involve greater interaction with data scientists and the use of quantitative tools.

“Another 30% of roles could be automated, reducing manual and routine tasks to free up workforce capacity to attend to more value-adding business questions.”

Clark added: “Clients and underwriters alike will reap the benefits of data-driven methods of monitoring exposure and mitigating losses, as well as using ever enriched claims data to drive better underwriting decisions that legacy rating methods would measure short against.”

To help insurance and personal finance professionals progress their careers, the CII launched a competency framework – titled the Professional Map – in July 2022.

The institute has also worked in partnership with Southampton Data Science Academy to develop an introductory-level course on data science and artificial intelligence (AI) within the context of insurance – the next cohort begins on 26 September 2022.