By relying on digitalized products and their variants, risk evaluation can be done automatically in large parts where the underwriting model can be predefined. The output of this process is basically an individual offer or policy. But there are other benefits which don’t immediately meet the eye. One of them is a higher degree of consistency in policies – e.g. in terms of wordings or clauses. Storing and analyzing the policies in digital form might even help to identify trends or reveal resp. evaluate risks in the current portfolio.
A digital product can be described as a set of conditions. A digitally generated offer or policy presents a selection of these conditions in a concrete form. As a result of the risk assessment it includes a description of premiums. It can also contain additional clauses, restrictions or more detailed descriptions which are relevant for the case in question. In digital form, offers and policies can be relayed to digital point of sales like insurance portals. Since signing printed documents is still the most common way for concluding contracts, additional printing features are a must-have.
Digital processes allow for a significant boost in speed when it comes to policy creation. The output – i.e. the generated offers and policies – is based on templates in most cases. As soon as these templates are configured and all required information is available, the generation of new offers is just a matter of pushing a button. For different sales channels, different templates can be created for determining an appropriate output.
Industrial insurance policies are highly individual. There are, however, certain aspects of policies where individual approaches are not necessary or even undesirable. This is especially true when it comes to wordings in the small print. In non-digitalized environments any attempt at standardizing these wordings involves high efforts. It is by no means a trivial task to make sure that every underwriter makes use of the same formulations. This is different in the digital world. The digital product definition provides a set of building blocks like predefined wordings. Generally, these building blocks are used during policy creation, which ensures a high level of consistency.
Identify trends and assess new risks
If digital information is stored and made accessible in a meaningful way, it can provide new insights. Although this notion holds true for every digitization initiative, it brings along some highly interesting implications for insurance policies. The basic idea of analyzing offers or existing contracts for statistical purposes is not new. But in pre-digital times, it has been done on a very coarse-grained level. Some parameters have been selected, aggregated and analyzed. The rest used to stay hidden in filing cabinets, exposed to dust and fallen into oblivion. In case of digital offers and policies that are stored and historicized, every little detail is potentially available.
Statistical analyses can be performed on a much finer level with digital information. If insurers have recognized new risks for example, they now have the means to look at their portfolio in detail and investigate how exposed they are. The final stage of this development is the constant monitoring of offers, policies and market developments in real-time. Insurers will be able to identify market trends quickly and adapt their portfolio accordingly. In other words: Digital systems empower insurers with unprecedented capabilities for market research.