Technology brings change; it’s inevitable. Most change is positive; it makes us more productive, it allows us to do things more safely, it brings convenience but there is also disruptive change. A recent paper from Oxford University sheds light on a change that some in the insurance industry will not appreciate; “The Future of Employment: How Susceptible are Jobs to Computerization?” picked insurance underwriters as the 5th most vulnerable profession in the world to lose their jobs to the rise of technology. Insurance claims and policy processing clerks may also gulp if they hear that they were 14th on the list. The study was a big one too – it looked at over 700 roles in the corporate world today.
Why are these jobs at risk?
The paper identifies the risks to insurance underwriters (and claims and policy processing clerks) as being one of new technologies that reduce risks (such as the driverless car) and also of new technologies that make it much easier to automatically calculate risk (the era of big data is upon us).
It’s also worth noting that the authors are not saying that the process of replacement by computer will be immediate – they see a “stepping stone” in that process where many of these jobs can be outsourced overseas for a lot less money prior to being eliminated. Rather depressingly the report puts over 100 million jobs in the West (not just insurance underwriter’s jobs) “at risk” because of technology developments.
But what about human judgment?
Unfortunately, this is the argument that many underwriters are going to try and fall back upon in the next few years (if the predictions are correct). Unfortunately, it’s a bad argument. If you replace an underwriter with an algorithm – the algorithm is far less likely to make an emotional response than a human being; in short its impartiality is likely to triumph over the “judgment” call more often than the other way around.
Is there any bright news in the report?
Claims loss adjusters, surveyors and risk managers are likely to think so. The report identifies one are of specific weakness with technology at the moment; the ability for technology to accurately perceive objects within “a cluttered field of view”.
Sales people and customer care may also take heart that computers are not seen to be “socially intelligent” as yet. That means; they’re not very good at handling complex negotiations or offering perceptible care.
It’s also worth noting that these changes won’t completely eliminate the underwriter from the insurance business. They’ll still be needed, to a much lesser extent, to help develop the algorithms to assess the risks on current product lines and more importantly to help develop new product lines where no such algorithm is currently available. However; this isn’t going to be of much comfort to the majority of underwriters.
What Do We Think?
We think that the “doom and gloom” of this report should neither be taken at face value nor dismissed. We see the role of the underwriter evolving to grow into something else; a role where both people and numerical skills are critical to deal with customers and analyze ever growing amounts of data. The scenario described in the report only works if all insurance products settle on a single standard algorithm for each product; underwriters are going to be needed to refine algorithms and to put a “human face” on underwriting to keep an insurer’s commercial edge.
The underwriter will evolve as the book evolved to meet the Kindle (or e-book platform) but it’s almost certain that underwriting as a profession is in for some major changes in the near future.