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Celent Report Looks at New Ingredients in Underwriting

Staff Writer | July 21, 2016

Celent has issued a new report on underwriting, Reinventing Underwriting: New Ingredients for the Secret Sauce. Which examines how innovation has exploded across all aspects of underwriting and product management

Underwriting is at the core of the insurance industry; it is the secret sauce, according to Karlyn Carnahan, research director in Celent’s insurance practice and author of the report. For hundreds of years, this process was accomplished through the individual judgment of highly experienced underwriters. Insights were captured in manuals of procedures and carefully taught to succeeding generations. 

Over the last few years, carriers have been heavily engaged in replacing core policy admin systems, enabling a fundamental transformation of the underwriting process. Carriers are using their newly gained technology capabilities to create dramatically different products, develop innovative processes driving efficiency, improve decisions, and transform the customer experience, according to Carnahan. 

This report looks at underwriting and product management and describes some of the newest innovations in each area with specific examples provided where publicly available.

“What you’ll see is that almost every aspect of the underwriting and product management functions are being fundamentally transformed as carriers find new ways of utilizing and applying data,” says Carnahan. “Carriers are creating dramatically different products, developing innovative processes, and transforming the customer experience.”

Key findings in this report include:

  • Carriers are using product innovation as a competitive differentiator and are experimenting with new types of insurance products that go well beyond basic indemnification in the event of loss. Parametric products, behavior-based products, and products that embed services to prevent or mitigate a loss are becoming more common.
  • Predictive analytics are being used to better assess risk quality and assure price adequacy, as well as to control costs by assessing which types of inspections are warranted, or when to send a physical premium auditor, or when to purchase third party data.
  • Individual risk underwriting hasn’t gone away for commercial Ines, but the characteristics that are driving it are more quantified, requiring more data and more consistent data. 
  • The role of the product manager is changing dramatically to one of managing rules rather than managing individual transactions.  This requires new skills and new tools. It also will drive changes in how regulators monitor carriers’ underwriting practices. 


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