March 23, 2016
Underwriting plays a vital role for services that depend on correct risk assessment. Lending and insurance companies are especially dependent on the correct estimation of creditworthiness and the level of risks involved in relationships with a customer. That is where relevant data aggregation can come in handy to ease the process and provide a correct estimation of the risks.
Correct underwriting can have a significant effect on the policy terms and potential revenue of companies. Insurers and lenders could seize the highest value from effective underwriting. Given the trends of moving from lifetime insurance to short-term and tailored insurance, it is especially important for companies to make the most accurate decision on the terms offered or risk to lose funds over unforeseen circumstances.
Pricing policies and bundling of the services to offer to a particular customer are the areas most affected by effective underwriting. Traditionally, insurers and lenders rely either on a standardized score like FICO or on a retrospective data. However, with the development of technology and its evolving role in one’s life, underwriting is gaining a fresh perspective.
Emerging technologies create new sources and types of data that can be gathered about a potential customer. In fact, technology like wearables, trackers that our phones are stuffed with, can create a constant stream of evolving data and make predictive analytics easier. Hence, the services offerings can evolve to best suit the situation.
Sensory data can even help in anticipating the evolving needs of the customers and keep services and companies relevant. Multichannel data collection and monitoring can help organizations to keep their services fresh and cut off those losing relevance. Internal teams can also aid from a real-time data stream in bringing each member of the organization up to speed.
InsurTech is one of the emerging industries that saw an opportunity in utilizing technology for underwriting. Performance tracking devices both for health and for equipment can significantly increase the accuracy of risk estimation and enhance predictions. If allowed, wearable technology can transmit accurate data of a person’s health in a constant stream and ensure that companies have comprehensive information about personal health conditions and policies that can be offered at the moment.
Over time, sensory technology will gain even greater importance as it will accumulate a significant amount of data. Underwriting will get to another level with the opportunity to put together historical data and detailed streams of current data. It will allow the viewing of more accurate patterns and make accurate forecasts.
Powered by accurate and detailed data streams coming from sensory technology, underwriters will be able to play a significant role in developing new products, shaping tailored packages for different markets and define the pricing policy.
The approach to building a product can see a significant change with enhanced underwriting. Pricing can be shifted from fixed to real-time and elastic, depending on the changing environmental conditions and the constantly changing personal data.
Over time, the rich sensory data can provide insights on the value of certain services. Detailed historical data may be helpful in the understanding of the impact certain services have on customers’ lives and well-being.
Needless to say, predictive analytics and modeling can be significantly transformed by the more detailed data that sensory technology is able to collect. Again, historical detailed data can aid in building accurate models.
As any other function within a particular organization, in the near future, underwriting will see a revival and drastic change with the evolution of technology and, especially, the development of sensory technology.