Is Automation Going to Put an End to the Underwriting Profession?
December 13, 2015| Von John Najarian |
L/H General Industry
Region: North America
Recently, the jobs website CareerCast.com completed a study and published a list of the “10 Most Endangered Jobs of 2015." Right there at position #9 is the good ol’ insurance underwriter, with streamlined processes cited as the main culprit. Not exactly wonderful news, right? Maybe you are thinking the answer to the title question is “Yes.” Actually, I have an opposite and optimistic viewpoint.
To be clear, this is not a debate of the projection. The U.S. Bureau of Labor Statistics projected that between 2012 and 2022, the number of underwriting jobs across all industries will shrink from 106,300 down to 99,800, a drop of 6%. But before we dust off our resumés, let's look at some insights.
Demographic trend is a big factor. The average age of the underwriter continues to increase. Eventually, the boomer retirement surge will fully unfold. In an ideal world, which might actually be reality, the gradual reduction in job positions projected over the next several years might be absorbed through natural attrition and retirement rather than forced job elimination.
Where do things stand today? This year, several major individual life carriers implemented or announced projects to fill 40 to 50 new underwriter positions at each company. Recruiting professionals continue to report they need more talent in the pipeline to feed the open positions.
Outsourcing of the underwriting function is also thriving, as the business needs must be met somehow. These and other signs show we have a long way to go before supply catches up with current demand, at least for certain product industries.
Back to the main culprit, no one can argue automation is not here to stay, and it will only become more sophisticated and prevalent as new technologies arrive to the scene, some of them offering excellent risk data at low cost. We underwriters need to embrace - indeed promote - the progress toward automation. It improves the intrinsic job quality by eliminating the time and energy needed for mundane cases, and it improves the overall business outcome. One benefit among many is that automation helps to improve consistency of underwriting decisions.
And let’s not forget underwriters are still needed to design, monitor and revise the rules running automation. That is one reason why the job reduction drops 6% and not 60% or even higher.
The bottom line, whether we are thinking about automated underwriting or any other trend, is that we can evaluate it using the following framework.
- Faster - Does it shorten the amount of time needed to make a decision?
- Overhead - Does it reduce operating costs?
- Risk Selection - Does it improve our ability to segment risks effectively?
- Experience - Does it improve both the consumers' and distributors' customer experience?
Automation hits all of these factors.
However, let’s assume an underwriter does lose his/her job due to automation. What better skill set to have than one that includes analysis, decision-making, communication, negotiation, teamwork, not to mention product knowledge and specific risk expertise? In the Life and Health world of insurance, for example, understanding anatomy, physiology, disease process and treatment is a valuable asset. Whenever we read descriptions about the younger segment of the workforce, their desire to seek changes in direction over time is always included. The skills that an underwriter develops translate and transfer quite nicely to other fields of insurance, for young and mature alike.