Transforming Underwriting for Mid and Large Commercial Lines

The 2020 pandemic changed things for all of us. While we’ve returned to “business as usual” in general, underwriting for mid to large commercial lines has changed. Our priorities have changed, and underwriting roles continue to change and adapt to prepare for the days ahead. Here’s what you need to know about the current state of underwriting for mid and large commercial lines and what to prepare for as we head toward 2030.


What Has Already Changed Since 2020?

The COVID-19 pandemic has significantly impacted the underwriting process for mid and large commercial lines of insurance. Some of the key ways in which the pandemic has affected underwriting for these lines include:

  • Increased Scrutiny of Business Continuity Plans:

Insurers are more concerned about the business continuity plans of their commercial clients. They now assess how adequately businesses have prepared for disruptions like pandemics. They also look at how well they have responded to those in the past. These choices can impact underwriting decisions and pricing.

  • Risk Assessment for Pandemic-Related Exposures:

Insurers have had to develop new risk assessment models. These models help them evaluate the potential impact of future pandemics on businesses. This includes assessing supply chain risks, business interruption coverage, and the financial stability of insured companies.

  • Changes in Risk Appetite:

Some insurers have adjusted their risk appetite. They may now be more selective in underwriting industries or businesses severely impacted by the pandemic. Two examples are hospitality and travel-related companies.

  • Increased Data and Information Requests:

Underwriters now request more detailed information from businesses than before the pandemic. They now will ask for financial statements, business continuity plans, and how they adapted to the pandemic. This information helps insurers assess the risk more accurately.

  • Pricing Adjustments:

Pricing for commercial insurance lines now accounts for increased risks related to the pandemic. Some businesses have seen higher premiums, while others may have had coverage reduced or become more restrictive.

  • Evolving Coverage Terms and Conditions:

Insurers have updated policy terms and conditions to better address pandemic-related risks. These include changes to business interruption coverage, exclusions related to infectious diseases, and other adjustments to policy wording.

  • Reevaluating Claims Handling Processes:

The pandemic has led insurers to review their claims-handling processes and procedures. Examples include assessing how quickly claims are processed and whether policies provide enough coverage for pandemic-related losses.

  • Remote Underwriting and Technology Adoption:

Many insurers have transitioned to remote underwriting processes. They now rely on digital tools and technology to assess risk and communicate with clients. This trend is likely to continue even after the pandemic subsides.

  • Uncertainty in Predictive Modeling:

The pandemic introduced significant uncertainty into predictive modeling used for underwriting. Historical data became less reliable. As a result, insurers adjusted their models to account for the unique challenges presented by the pandemic.

  • Focus on Risk Mitigation:

Insurers may now encourage businesses to implement risk mitigation strategies to reduce their pandemic-related risks. They may recommend improved business continuity planning or supply chain diversification. They may also suggest putting into place some health and safety measures.


Of course, the impact of the pandemic on underwriting practices can vary among insurers and across industries. As more information comes to light, insurers will need to continue to adapt. The industry will need to prepare for future pandemics and other unforeseen events. In the meantime, here’s what’s changing as we approach 2030.


More Change is Coming in Underwriting 

According to a ReSource Pro survey of P&C insurance executives, 87% expect major changes to underwriting over the next five years. Back in 2020, only 69% expected changes in the same time frame. When asked about the next ten years, 94% of P&C executives see major upcoming changes in underwriting.


5 Factors Driving Underwriting Transformation 

What’s driving this change? Researchers have identified five major factors driving the transformation of the underwriting process:


1. New Data Sources, Models, and AI

First, insurers are leveraging big data and advanced analytics to improve risk assessment. Access to vast data, including information from social media, IoT devices, and more, can improve accuracy.

Second, machine learning algorithms and artificial intelligence (AI) are also automating the underwriting process, making predictions, and enhancing the risk assessment process.

Lastly, telematics devices and Internet of Things (IoT) sensors in vehicles, homes, and other assets can now provide real-time data. This helps agents with more accurate underwriting and personalized pricing. 


2. Transformational Technologies 

Insurers are embracing transformational technologies. Examples include workflow automation, admin systems, content management, chatbots, and AI/machine learning. These technologies are improving efficiency in managing the underwriting process and general workflow.


3. Evolving Customer Demands

Customers now expect more personalized insurance products and pricing. They believe everything should be based on their individual behaviors, lifestyles, and needs. They’ve also come to prefer a seamless, online, and mobile-friendly application and underwriting process. This makes it essential for insurers to invest in digital solutions.


4. Changing Distribution Landscape 

The rise of digital distribution channels, such as online marketplaces, direct-to-consumer platforms, and mobile apps, has streamlined and automated the underwriting process. Insurers are investing in technologies that allow for efficient underwriting through these channels.


5. Changing Workforce

According to the U.S. Bureau of Labor Statistics, the insurance industry will likely have a significant turnover in the next five years. Statisticians expect about half the workforce to retire by 2028. The loss in agents due to retirement, combined with the adoption of AI, is setting up the industry for transformational changes in underwriting. There will likely be a blend of humans and AI in the underwriting process in the future.


Setting Your Agency Up For Success 

Agents can set themselves up for success by being adaptable and leveraging opportunities. Here are some strategies for thriving in this evolving landscape:

1. Stay Informed and Up-To-Date

Stay up-to-date with the latest industry trends, new technologies, and regulatory changes related to underwriting. Continuous learning and staying informed are essential for adapting to evolving practices.


2. Leverage Technology

Embrace technology to streamline your operations and underwriting processes. Invest in software, customer relationship management (CRM) systems, and digital marketing tools. These new innovations in tech can improve efficiency and customer service.

Use data analytics to understand customer needs better and offer personalized insurance solutions. Data-driven insights can also help you identify potential clients. Once you’ve brought them on as clients, it can help you tailor your services to their specific requirements.


3. Partner With InsurTech Firms For Underwriting

Collaborate with InsurTech companies that offer innovative solutions for underwriting and customer engagement. These partnerships can help you access advanced underwriting technology. They may also help you be able to offer more competitive insurance products.


4. Adapt to Client Preferences AND Get Feedback 

Be sure you know how your clients prefer to communicate and interact. Some may prefer in-person meetings, while others may be more comfortable with digital channels. Tailor your approach to suit their preferences. 

Get regular feedback from your clients and use it to improve your services. Act on their suggestions to enhance your customer experience and underwriting guidance. Continue to get feedback and continue to improve. 


5. Don’t Forget The Importance of Networking

Focus on building strong relationships with insurers, underwriters, and other industry professionals. These connections can provide insights into underwriting practices. They may even help you access better products and support.


Final Thoughts

There’s no doubt about it; the insurance industry will go through a massive change between now and 2023. However, by adapting, embracing technology, and providing value to clients, independent insurance agents can continue on the road to success as they approach 2030 and beyond.

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