Is technology creating an ‘underwriter in a box’?

We often hear how the property and casualty insurance industry is slow to adopt technology, but is it possible the industry is actually becoming overly reliant on technology?

Yes, said Neil Mitchell, CEO of Player’s Health Cover and former managing director of Marsh Canada. While technology is providing a positive effect, it is also commoditizing the art of brokering, underwriting and negotiating appropriate insurance protection for clients.

“Using technology to create an algorithm or AI-driven ‘underwriter in a box’ will marginalize both the importance and need to create tailored insurance coverage that fully address the unique, and often unseen insurance needs of individuals, businesses and the communities we live in,” wrote Mitchell in an article titled The Endangered Art of Insurance. The article was published in MSA Research’s Quarterly Outlook Report for Q2 2018, a copy of which was provided to Canadian Underwriter Friday.

Insurtech is bringing technology to the insurance industry, which is in dire need of transformation, Mitchell wrote. “However, for insurance to remain valuable, the art of insurance, which is the ideation, investigation, creation and negotiation of an insurance contract, must not be lost. It is only through a deliberate investment of time to research and review a client’s operations, insurance contracts, engineering, loss prevention and claims reports that an insurance broker can utilize its insurer relationships to negotiate insurance solutions that meet the unique insurance needs of clients.”

Mitchell, who has been in the P&C insurance industry since 1989, said those who have been in the industry for 20+ years were trained and understood that for risks to be insured, the insurance policy wording had to include words and clauses that provide insurance protection.

“It was believed that only through long and tedious hours of reading, comparing words and clauses, dissecting claims reports and developing a deep understanding of a client’s business that we were able to draft coverage, negotiate terms and conditions with re/insurers on behalf of our clients to address their unique risks and exposures,” he wrote. “Only then would we be fulfilling our role as a trusted risk and insurance advisor.”

Oftentimes, Mitchell said, the most significant, serious and unique risks were those which were not obvious. Once identified, the policy wordings had to be drafted, created and amended to reflect such nuances and then explained and discussed with re/insurers so they understood why these features were critical to our client. At times, clients were surprised to learn about their exposure to uninsured risks or they had no idea that coverage could be found to cover a loss which would otherwise destroy or severely affect their business. “In other cases, clients simply expected us to act in this manner as their trusted risk and insurance advisor – that’s what they expected their insurance broker to do!” Mitchell wrote.

“To boil insurance down to an online transaction that must fit the “underwriting box” business model is a fool’s errand and will only serve to disserve our clients,” he concluded.