Part two of my discussion with Sujeeth Bishoon, an executive chief underwriting officer at Constantia insurance company about underwriting. This time we are exploring whether underwriting is an operational or strategic function.
Sujeeth: I think people often look at underwriting as a pure operational function, but it’s both strategic and operational.
On a strategic level – Insurers must have a clear understanding of the various risk factors across the segments which they currently participate in and segments they plan to operate in. As such, insurers strategically define and at least annually, review their risk appetite and underwriting governance, which is typically outlined in a company underwriting risk appetite policy governance document.
On the operational level – An underwriting team will daily review a wide variety of new business quotations, endorsements, underwriting and survey queries, process policy renewals and essentially use their skill sets to determine whether the risk is priced correctly, and if it is aligned with the company’s risk appetite.
Tony: So, with technology, artificial intelligence, machine learning and all these things trying to optimise every aspect of the insurance business, do you think that machine learning and artificial intelligence is a threat to employees in the underwriting space?
Sujeeth: Definitely not. I think a skilled underwriter will harness the benefits of machine learning and artificial intelligence and combine it with their own skill and experience. Machine learning and artificial intelligence no doubt has immense potential to unlock efficiencies, and improve the intermediary partner and the customer experience, for the less complex lines of insurance.
However, it is very difficult to replicate tacit knowledge, which is the knowledge that is gained through experience, intuition and judgement. And that is typically required for the complex and specialist lines of insurance, such as corporate property risks, which often require detailed risk surveys to be conducted.
Tony: In terms of those skills that are needed by an underwriter, how should they go about gaining the needed skills, because I would assume that a lot of that is on the job learning?
Sujeeth: Absolutely, a good underwriter has sound technical knowledge and understanding of insurance and risk management. And these days you can gain that knowledge through studying at various educational institutions such as Milpark Business School, for example, and through various industry mentorship programmes, where one can acquire the needed knowledge through mentorship. An underwriter must also have very good analytical skills, which is key for quantifying risk exposure and pricing risk. Lastly, I think underwriters must have a passion for underwriting and with that, they bring to the table invaluable intuition and judgement in identifying and evaluating risk.
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Constantia Insurance Company Limited is a licensed non-life insurer and an authorised Financial Services Provider (FSP 31111).
Constantia Life and Health Assurance Company Limited is a licenced life insurer and an authorised Financial Services Provider (FSP 49986).
Constantia Life Limited is a licenced life insurer.
Tony: From a broker perspective, what level of underwriting skill do you think they need in their brokerage? Is this something that you guys, from a Constantia perspective underwriting division specifically, get involved in to assist and make sure that there is some level of underwriting skill?
Sujeeth: To answer the first part of the question, the brokers need to have a good attention to detail, especially during the phase of conducting the client’s needs analysis. This is where they identify and quantify the risks the client is exposed to. They must also have a very good understanding of the insurer’s underwriting qualification or risk acceptance criteria and have knowledge on the insurance product offering and the cover options under that product.
As I said previously, a lot of brokers these days, also render risk management advice to the clients, to help them mitigate and reduce certain risk exposures. That risk management advice is invaluable. At Constantia we offer our intermediary partners, product training and we also assist them with underwriting support through our distribution and technical underwriting teams.
We do however go a step further and share the risk improvement actions that arise from risk surveys with the broker, so that they can appropriately advise the clients of the interventions that are required to reduce or mitigate the risk.