Underwriting in commercial lines with Mahima Agarwal and Susanne Ebert
McKinsey spoke with Mahima Agarwal, an associate partner in the London office, and Susanne Ebert, a partner in the Frankfurt office, to understand more about the future of underwriting in commercial lines insurance.
McKinsey: What challenges are affecting underwriting in commercial lines today?
Mahima Agarwal: In commercial lines insurance, market conditions are changing; for instance, the economy is becoming increasingly interconnected, and catastrophic events have become more frequent. This puts increased pressure and demand on underwriting in commercial lines.
At the same time, technological advances have increased pressure on insurers to develop efficient processes that support human underwriting talent. Currently, processes are still rather manual, and addressing these trends will require a holistic change of the traditional underwriting function. And the underwriting function has not proved to be quick to change in the past.
McKinsey: How does underwriting talent add to insurers’ success in this segment?
Susanne Ebert: Attracting, developing, and retaining the best underwriters with the right skill sets will be the critical element to win in commercial lines. It is important to find skilled underwriters who can bring together and interpret information from very different fields as risks become more complex. And underwriters of the future are likely not to focus on one singular task but to work across functions in a multifocused and interconnected way, both internally and within external ecosystems. Winning insurance carriers will revise their talent strategies to include a new focus on skill development, the introduction of tools and techniques to empower underwriters in their day-to-day work, the provision of alternative career paths (for example, expert versus management track), and a combination of remote and in-person work to fit the new normal environment. This will require substantial attention and investment from management, but it is crucial to master the challenges ahead in this segment.
McKinsey: How will data and analytics transform the industry over the next few years?
Mahima Agarwal: Best-in-class insurers are already setting themselves apart from competitors by building advanced data and analytics underwriting capabilities that heighten value for brokers as well as talent.
Distinctive broker experiences—via digitalized portals and processes—and improvements in claims experience result in increased business volumes.
Internally, an improved risk evaluation process not only enhances efficiency and decision making but provides a distinct experience for employees. For example, better use of data throughout the underwriting process can help insurers prioritize prospects, validate risk information, structure policies, and develop more accurate pricing.
These data-driven insights can significantly change the way underwriters interact with information before applying their judgment by providing more precision and control.
McKinsey: What does it take to put everything together? What are best-performing companies doing better than others?
Susanne Ebert: Underwriting excellence remains of the highest importance to company performance. Insurers need to keep their focus on the essential building blocks: steer the portfolio to the right place and time, strive for excellence in pricing, use human judgment and data-driven analytics to select the right risks, and optimize capacity and coverage according to market conditions—while fostering the critical enablers around people, technology, distribution, and strategy. In commercial lines, particularly, insurance carriers need to strike the right balance between art and science to be successful.
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Mahima Agarwal is an associate partner in McKinsey’s London office, and Susanne Ebert is a partner in the Frankfurt office.
For more on underwriting, see:
From art to science: The future of underwriting in commercial P&C insurance