What is the state of data-driven underwriting?

The insurance industry has long been anchored in risk assessment and mitigation; processes inherently reliant on data. That the industry is data-driven is nothing new. However, with the advent of advanced technologies and data democratization through open source and no-code platforms, insurance companies are increasingly functioning as data firms. This evolution is driving a paradigm shift in underwriting, where data-driven approaches are transforming traditional practices.

The state of data-driven underwriting
Traditionally, underwriting has been a labor-intensive process, sometimes marred by inefficiencies and errors due to unorganized systems and legacy technologies. This is not to say that taking time to assess and accurately price a complex risk is not necessary, but having the full information required to make an informed decision has always been paramount and has in the past been slowed by these challenges.

However, the industry is witnessing a significant shift as data-driven underwriting becomes the new norm. Modern technology, particularly no-code platforms, is at the forefront of this transformation, enabling companies to streamline processes, reduce errors and enhance operational efficiency.

No-code platforms democratize data handling, allowing non-technical users to build complex data integration jobs without needing to write a single line of code. This has profound implications for underwriting, where the ability to rapidly process and analyze vast amounts of data can lead to more accurate risk assessments and better decision-making.

The role of no-code platforms
Unorganized systems and processes often lead to broken collaboration chains, causing communication gaps and bottlenecks. Historically, the lack of accessible tools, that do not require a high level of technical ability, has exacerbated these issues. When such tools are available, they often function like a black box, limiting control over data processing.

Innovative technology solutions now enable firms to address these challenges effectively. For example, no-code data integration platforms allow actuarial, underwriting, and data teams to build complex data integration jobs in just a few minutes. This truly revolutionizes data processing, particularly with bordereaux, which are essential for managing reinsurance contracts and assessing risk.

In the Lloyd’s market alone, roughly 3.5 million bordereaux are processed annually. This immense volume presents a significant challenge, as each bordereaux requires meticulous data cleansing and structuring. As companies grow, the number of bordereaux they need to process increases exponentially. Traditionally, the solution would be to hire more staff to handle this workload, driving up operating expenditures.

Leveraging modern technical infrastructure, leading underwriters can now streamline bordereaux processing through data integration platforms, drastically reducing the time and resources required and empowering the development and management of hundreds of bordereaux integration jobs within a fraction of the time previously spent.

Data quality and efficiency gains
The quality of data has always been a critical factor in effective underwriting. A significant portion of data errors, such as those found in bordereaux data, originate at the source. By enhancing data processing capabilities through advanced platforms, firms can significantly reduce these errors, resulting in more accurate underwriting and better outcomes.

Achieving higher rates of straight-through processing (STP) is a testament to the effectiveness of this approach. Re/insurers are projected to process thousands of bordereaux in the coming years, with a substantial portion now targeted for STP — an unprecedented development that the industry has not seen before. This highlights significantly improved efficiency and scalability of data-first processes.

Driving change in the industry
The insurance industry has been criticized for being slow to adapt to technological advancements, but this slowness has often been hindered by under-investment and a lack of incentives to drive change. However, there is a growing recognition of the need for innovation. Initiatives like Lloyd’s Blueprint 2, despite its delays, underscore the industry’s commitment to modernization and a data-first approach.

We are also increasingly seeing industry events focused on insurance technology bringing together like-minded firms to discuss and drive change. While challenges remain, significant inroads are being made by embracing modern technology and fostering collaboration within the industry; both at large-scale market events and also at individual company knowledge sharing sessions.

The future of data-driven underwriting
As the insurance industry continues to evolve, the role of data will only become more critical. Superior data drives superior insights, enabling companies to rebalance portfolios and reduce last-minute surprises. From our experience, a bespoke approach to open underwriting, supported by in-house technology ecosystems, allows for superior analysis and fluidity in portfolio management — with significant underwriting performance results for both ourselves and our underwriting partners.

My call to action is clear: Insurance companies must recognize their role as stewards of data quality to truly excel as data-driven entities. This means investing in robust data governance frameworks and prioritizing data accuracy, completeness and consistency across all operations. Embracing low-code and no-code platforms is essential in this transformation, as these tools democratize data handling by enabling non-technical staff to participate in data management and integration tasks. By ensuring high data quality through these accessible technologies, insurers can embrace their roles as data firms. This stewardship not only drives better business outcomes but also builds trust with customers and partners, reinforcing the critical importance of data in modern underwriting practices.

See more:How can AI boost commercial insurance underwritingCan gen AI teach the next generation of underwriters?Chubb’s Michelle McLaughlin sees data as the future of underwriting