The Winds of Change

E-trading, algorithmic underwriting, AI, e-follow syndicates… the discourse is very tech-heavy, but at the same time we have pleas for the rejuvenation of the Lloyd’s Room, and to recognise the importance of face-to-face trading. There is a ‘science v. human’ battle waging over the future of underwriting but it seems to me that the future success of underwriting will be about the mix of humans and science, with humans ultimately leading out.

The appearance of the 2023 London’s Leading Underwriters Report is a good point at which to take stock. What we see this year, is more underwriters and companies than ever being nominated and the importance of the human in underwriting seemingly undiminished. Even beyond the London Market in the UK regional market, human underwriting isn’t going out of fashion, despite the proliferation of e-trading systems.

Good underwriting depends on data interpretation; human judgment still plays an important role, albeit supported by technology. In this year’s Report, brokers again most frequently single out the leading underwriters for their knowledge, the dictionary definition of which is “facts, information, and skills acquired through experience or education; the theoretical or practical understanding of a subject.” Knowledge goes beyond data or algorithms, being based on experience and pragmatism, subjective human attributes which (so far at least) computers have not quite grasped, even ChatGPT.

Of course, underwriters are also selling their product, and the interaction with brokers to achieve this is still about the ‘value exchange’ between people. These exchanges don’t just live in a single deal or transaction but are based on complex human interpersonal relationships, a capability that the silicon chip also lacks, but which is integral to the success and growth of all markets. In the 2023 Report, leadership has increased significantly as a reason for nominating underwriters, another human capability that is highly valued in the current market where rising insurance costs and the challenges of covering risks has increased: the greater the uncertainty, the greater the need for human leadership.

At a more subtle level we see the London underwriting culture changing: slowly but surely, more women are being nominated for example, but underneath these numbers there is also a sense that diversity is now a real positive, opening up the market, modernising its thinking and ideas.

Globally, we are experiencing startling, fundamental shifts and the world feels a much riskier place: geopolitical instability, climate change, the evolution of technology and AI all add to the unease. But these challenges have an upside and should define insurance’s future. Climate is driving major capital investments and the need to innovate to cover new risks whether it be green energy, tech or supply chains is clear. If underwriters can develop products and services to meet these needs, they will drive growth and value in the P&C sector as well as helping the world to meet existential challenges, a good reason for young people to join the business if ever there was one.

In this changing environment, the insurance proposition is evolving, going well beyond covering risks and paying claims, moving into risk mitigation and corporate and governmental advisory work, all of which will depend on the underwriters’ secret sauce – ‘knowledge’.

Thank you to all who take part in our research and provide us with the incredible information upon which to build this and all our other Reports, now used so widely for businesses to make better decisions.

Ben Bolton