As big data begins to revolutionise the role of the underwriter, Philip Williams looks at how the newly formed Society of Underwriting Professionals can offer guidance
One building over from the CII's head office in the centre of London is a small Sainsbury's Local. Outside this unassuming Lombard Street building there is a small blue plaque on the wall, which marks the former site of the Lloyd's Coffee House where in the late 1680s, one of the world's major insurance markets was born.
Nearly 350 years on, we have yet to invent a concept or idea that can replace insurance. While the world changes and the risks facing us all change, insurance stands solid as a way of pooling risk, enabling trade and protecting the irreplaceable.
Underwriting through this time has changed of course and, in many ways, we don't notice it. Imagine talking to an underwriter from the 1950s about a catastrophe model for instance, or consider the sophistication in underwriting a personal car insurance product now versus even 10 years ago. Whilst we are potentially living through a period where in a decade, the nature of underwriting will change more than in the previous 50 years. Every generation thinks they are living through a new revolution, but with the exponential growth in computing power, in my opinion no profession will see as big a change to the day-to-day role as an insurance underwriter during the next 10 years.
A study by Oxford University rates the insurance underwriter as the fifth most susceptible role to being automated. However, the notion that underwriters will be replaced by robots is of course fundamentally flawed. Yes, underwriters will have more time; mundane tasks will be automated and day-to-day collection and production of reporting will cease. The important role underwriters will be able to play in this ecosystem will be different. Going forward, vast quantities of data will be at the disposal of the underwriter -- not just generated by the headline-grabbing online connected devices, but in the more mundane aspects of risk reporting and risk detail.
For those entering the profession today, this will be second nature. The skills underwriters will learn during their training will be more data-focused, more computer-oriented and less codified. The underwriter's greatest asset, their judgement, will be as important as ever. But with portfolio underwriting increasing over case underwriting, this judgement will be levied on different decisions. For those underwriters that are 20 years into their careers, this is a challenge.
The potential is there to become an employer of choice for a range of talent that we do not currently attract
During the 1990s and 2000s, the banking industry saw huge transformation. Within 15 years, the late-night bustle of traders hitting the bars after the bell had rung for the close of the day's trading had been transformed by machines. The companies with the edge had changed the skillset.
Gone were the extroverted salesmen; in came the quants -- mathematically-minded, computer-literate traders that revolutionised the world of banking. Perhaps the edge this approach will give to insurance companies is not as large as that afforded to the largest investment banks. But the battle we're already seeing play out in personal lines will undoubtedly affect roles up and down the insurance value chain.
The debate in insurance circles will most likely continue to be how the underwriting profession can continue to inspire public confidence during this changing period. Training, continuing professional development and a commitment from organisations young and old to develop their people will remain crucial to the success of the industry as a whole. With people changing roles and companies at a significantly higher rate than before, it will be just as important for individuals to place a higher emphasis on their own personal development as it is in the interests of business to develop them. Those individuals will stay close to the businesses that are doing the most in this space, but most importantly, in my opinion, will bring to the profession a human touch.
GUIDING HAND
The Society of Underwriting Professionals (SOCUP) is here to help the membership navigate through these choppy waters. In addition to the high-quality development material on relevant subjects, expect some thought-leading material on the issues facing the industry and, importantly, practical takeaways aimed and curated directly for underwriters. I am delighted that this material will be available through multiple mediums on the Society website: www.socup.org.uk.
The SOCUP board includes a wide cross-section of the insurance profession, across differing sectors, distribution methodologies, lines of business and stages of career. Part of our role is to ask our members to try to identify impact areas that matter to them, helping provide a place for the profession to reflect on the challenges of this dynamic world.
I am excited and optimistic about the opportunity for underwriters to re-emphasise the benefit of the profession to the public at large during the coming years and am honoured to be appointed to this non-executive director role.
Philip Williams is non-executive director at the Society of Underwriting Professionals