The future of underwriting

The report released earlier this week by Ernst & Young and the CII has revealed a great deal about the current and the future state of the SME market.

It does not make for uplifting reading – particularly if you happen to be on the lookout for underwriters.

Though few of the report's findings are revelatory, it is the intensity of the various influences – regulation, technology, the soft market, consolidation and capital for investment – that should give the market cause for concern.

One of the its central conclusions is that a chronic shortage of underwriting expertise is plaguing the industry. This shortage, if not addressed, will hit the distributors very much as hard, if not harder than the insurers.

Considering that by 2012 the consolidators alone are estimated to control almost a third of the £9bn SME market, this is not so surprising.

The roles of junior, case and senior underwriters will all be subject to considerable change over the next five years, with the latter in particular having to adopt increasingly portfolio management type roles. Junior underwriters meanwhile will find themselves increasingly geared to internet-based work from centralised, low cost locations, while case underwriters will increasingly take up residence among the ranks of the distributors, and will be expected to provide a vital service function historically alien to them.

The CII is taking steps to plug the gap, but whether these steps can keep pace with the rate of change is an open question. 55% of CII members polled for the report said that not enough was being done to prepare underwriters for the future.

Yet amidst the clouds, there is a silver lining. The industry seems to have a knack of responding well to seismic change. And UK insurance plc remains among the most efficient in the world, as evidenced by its elimination of half a billion in costs in underwriting and claims handling since 2002.

The skills are there, says the CII. The fate of the industry lies in their hands.