Insurers must re-evaluate underwriting models to survive, says claims manager

Insurance firms face completely reconsidering how they assess risk and how their underwriting structures affect the customer.

That is the opinion of Graham Gibson, chief claims officer at Allianz, which is in the process of merging all the insurance activities, such as claims and underwriting.

“We are going to have to think about our underwriting models, what that means for our customers and what it means from a claims perspective,” he said.

Gibson said that, in the fast-approaching future of autonomy, motor insurance will be reversed.

“At the moment, you learn everything you can about the person: where they live, any convictions and so on. Then it goes through to the car. Number plate, mileage, etc.

“That is going to completely reverse, because we are going to become irrelevant ultimately in terms of how the vehicle performs. At the moment, an underwriter analyses by how they think a person will drive, but that will completely change,” he said.

“I think we will ultimately move in that direction, but much will depend on who is in charge of the vehicle when an accident occurs.

“What is clear is that products will need to be redesigned over the coming years and with this may of course come first party cover.”

The government has previously set itself the target of having autonomous vehicles on UK roads in 2021. However, the law will need to change before insurers can operate this way.

But now, Gibson sees this as an inevitable future. And that the law is trying to catch up with technology. “But the technology is much more advanced than the law,” he said.

All change at Allianz

Along with the merger with LV=, Allianz is also seeing a change in structure within itself.

“Here at Allianz, we (the claims team) are talking to the underwriting team a lot,” Gibson said.

“Historically, underwriting and claims have always remained very separate. I think more and more that this just cannot be the case.

“I think the interaction between all sectors, especially underwriting and claims, and bringing them together will be crucial in the future.”

That is already happening within Allianz Fraud, where the underwriting fraud and the claims fraud teams have merged.

And if other insurers don’t adopt this new way of structuring the business, Gibson thinks they will be “missing a trick”.

“Claims and underwriting are different sides of the same coin,” he said. Obviously, one deals with claims and the other pricing, but together these business areas bring a strong understanding of claims inflation market dynamics and customer needs.

“A company that does not bring all this to the fore will miss a trick and simply not be as strong.”

But Gibson sees this type of in-house synergy expanding further than the different sections of a business. He sees the full end-to-end relationship with the customer as one.

“When we would talk about the customer, about data and digital, they would be very separate issues. Now, I don’t distinguish much of a difference between the subjects and how we approach them when it comes to the whole process.”

Keep the fraudsters out

Allianz now refers to fraud databases at the point of application as well as at the point of claim, another thing not all insurers do.

“Understanding what is trying to come in the door and why, and trying to keep that out, is a good thing,” Gibson said. “Obviously, it is a lot cheaper to try and keep them out rather than letting them in and trying to manage it.

“Everyone will have their own skills that they will bring to the party, but it is bringing all those skills together to work better, that is the key.”