Altus Consulting, a specialist in Financial Services Management Consultancy, has released a whitepaper titled All Aboard for Modernisation: Next Stop Underwriting, which discusses the insurance industry’s imminent next phase of modernisation, with underwriting at the centre of this evolution.
Despite an estimated £15 billion spent over the past decade on transformation programmes, insurance businesses have yet to see substantial changes in both the industry and the services offered to customers.
According to a recent survey cited by Altus, only 20% of companies achieved more than 75% of the revenue gains they anticipated.
Additionally, despite the expectation that digital transformation would lead to significant cost savings, merely 17% of businesses managed to achieve more than 75% of their projected savings.
Altus highlight how this costly disappointment is not unique to the insurance sector; estimates suggest that 70-80% of digital transformation projects outside of insurance also fail, indicating a broader trend in the industry.
Delivering transformative change is challenging, as Altus Consulting has noted in previous analyses. Effective change requires a comprehensive set of resources, a team committed to modernisation, and expertise in executing change processes. Such a combination is rare, contributing to the high failure rates.
In the whitepaper, Altus discusses potential solutions, emphasising that modernisation offers a more compelling response to the challenges faced by the insurance sector, particularly in underwriting.
Mark Andrews, Insurance Director at Altus Consulting, explains: “Our whitepaper explores how modern underwriting practices across the insurance market can address the challenges of the future, offering practical insights on leveraging technology, understanding core capabilities and building new processes, to not only enhance operational efficiency but also deliver more accurate, tailored risk solutions in an increasingly complex risk environment.”
The whitepaper argues that the issue is not merely about allowing transformational approaches to take effect; it highlights that many projects can only advance a business so far if underlying process issues are not resolved.
Andrews explains: “Transformation has disappointed because the technology is being used to update individual systems or products while ignoring the wider business architecture. Old processes and thinking resist, rather than support modernisation and have a chilling effect on the productivity of technology.”
Moreover, Altus notes that many companies in the insurance sector resort to disruptive “big bang” approaches instead of focusing on incremental changes that deconstruct operations into their constituent parts. The whitepaper posits that, instead of transformation, modernisation is the way forward.
In addressing the need for a modernisation strategy, Altus emphasises its urgency in the underwriting function, the backbone of every insurance company and the starting point for all modernisation plans.
This function is significantly influenced by technological advancements and shifts in business models and appetite. True modernisation will facilitate more effective risk selection and pricing, enable the management of greater volumes of submissions, and alleviate the burden of manual processes that hinder underwriting effectiveness.
Altus Consulting cites recent research indicating that 70% of digital transformations fail to meet their objectives. In contrast, businesses that invest in modernisation, productivity improvements, and enhanced customer experiences—true outcomes of digital transformation—achieve 1.8 times higher earnings growth compared to their peers.
Andrews underscores the growing importance of re-evaluating processes in light of recent developments: “The need to change track to reach modernisation is more urgent than ever with the ‘high speed rail’ effect of businesses scrambling to use Generative AI. The technology is sound, and a wide range of applications have been found, but many businesses will suffer from their lack of real transformative thinking. The lack of disruptive operational and technological design means they simply won’t get the return that their investment in Generative AI deserves.”
Ultimately, the success of any insurer hinges more on the risks it selects than on the investments it makes or claims it pays out.
Modernisation begins with underwriting but must extend across the entire business landscape to fully realise the benefits of investment.
Only then can the true transformation of the insurance sector occur—not through disruptive technological change, but through sustained and thoughtful modernisation efforts, as detailed by Altus Consulting.
Andrews concludes: “The insurance industry and underwriting in particular are great candidates for modernisation. Insurance is, culturally speaking, more conservative than many other sectors, and there can often be resistance to wholesale change. Which is why an incremental, methodical approach to modernisation offers the greatest chance of digital success to the insurance sector. Huge strides have been taken in digitising insurance but so far, the job is only half done. The task of modernisation is to fulfil the promises that transformation made.”
The post Modernisation as the key to effective risk selection and pricing in underwriting: Altus Consulting appeared first on ReinsuranceNe.ws.