Elevating the role of the underwriter as a highly skilled risk-management profession, especially in developing insurance markets, is crucial to underscore its importance in driving growth.
A primary goal of any life insurance new-business process is to approve and issue coverage to get the business on the books. This process can be compared to production-line work, much like an auto manufacturer.
Similar to an autoworker, whose job it is to help produce a vehicle for sale, an underwriter helps produce a life insurance contract.
But there is one important difference.
Unlike the autoworker on the production line, the underwriter has an additional role vital to managing the company’s risk and overall profitability. Underwriting is a key line of defense against anti-selection, fraud, and excess risk. This risk-management duty elevates the importance of underwriters.
Yet too often, underwriting is treated as only a production job. This is especially pronounced in Latin America and certain Asian countries outside the more fully developed markets of Japan, Singapore, and Hong Kong.
For the insurance industry to grow in these developing regions, a perception shift must take place. Underwriting needs to be viewed as a skilled risk-assessment profession whose practitioners bring to bear a mix of higher education, institutional knowledge, and advanced technology to better serve customers.
This article examines the underwriting profession in developing markets and offers advice on how underwriters can influence the industry to transform the perception and importance of their role.
Underwriters are vital in assessing and pricing risk. Yet the role is often viewed as limited to data collection and application approval based on set guidelines.
Seen that way, the job appears ripe to be replaced by automation. But in today's rapidly evolving risk landscape, even such automation will increasingly rely on the more skilled risk evaluation and decision-making abilities of highly trained underwriters.
Modern underwriters must employ sophisticated analytical skills, professional judgment honed through experience, and a nuanced understanding of risk factors.
The changing role of underwriting will make hiring and training new underwriters much more challenging. After all, only the complex cases that automation is unable to resolve will require the intervention of a human underwriter.
Reports dating back nearly a decade sounded the alarm on a looming talent crisis in the underwriting field. A 2016 report by the Life Underwriting Training Council entitled “Underwriting Talent: Future at Risk?” noted the industry’s challenges in attracting new talent and developing succession pipelines as current underwriters neared retirement. A 2017 article by the Life Office Management Association entitled “Who Will Fill the Underwriting Gap?” highlighted the same phenomenon.
Those early warnings have turned into reality. A 2023 study found that more than half of insurance executives surveyed said talent acquisition and retention difficulties would prevent growth in the year ahead.1 The US Bureau of Labor Statistics projections predict the insurance industry could lose roughly 400,000 employees through attrition by 2026 in the United States alone.2
In developing markets across Latin America and parts of Asia, a primary threat posed by the talent gap comes from fundamentally undervaluing skilled underwriters. Without a strong professional underwriting staff, insurers in these markets face several key challenges:
Ultimately, underinvestment in professional underwriting capabilities hinders growth, profitability, and competitiveness for insurers in these potentially lucrative developing markets.
For insurers operating in developing markets, elevating and expanding the underwriting function offers an opportunity to gain a competitive edge while managing risk effectively. Key strategies include:
Full responsibility for this transformation does not rest with C-suite executives and other company leaders. Underwriters need to advocate for themselves. Professional organizations such as those seen in the US, Canada, and Europe, for example, are extremely important to foster development within the profession, and they provide a platform to promote expertise across the life insurance industry.
With the ever-increasing prominence of AI and tech-enabled data analysis, underwriters must ensure the new technology is trained on the nuances of human expertise learned from years of practice.
Underwriters are the gatekeepers standing between an insurer and unacceptable risks. This expertise protects profitability and ensures sustainability. By proactively elevating the role of the underwriter and developing underwriting resources customized for local markets, insurers can optimize risk assessment and pricing for their customers while maximizing profitability and growth.
Learn more about creating solutions for the Latin American market and other developing regions by tapping into RGA’s global expertise.
