Challenges faced by Underwriters in India

This article was first published in the IIB Bulletin, 2014, Vol. 1, Iss. 2, p13 

https://iib.gov.in/IRDA/Articles/IIB%20Bulletin%20Q2%202014-15.pdf

“Professionalism must come into the Underwriting Business”...

-Shri M. Ramaprasad, Member (Non-Life), IRDA.

Underwriting is not an easy job in India. Not just because of the skills and domain expertise required, also because of the business environment. We surveyed 20 underwriters, from 16 different General Insurance companies in India about various practices and aspects of underwriting in their companies.

Lack of Data for underwriting purposes and to evaluate potential losses and lack of historical experience emerged as the most important concerns of the underwriters. Most of the companies have risk based underwriting prevalent in the organization; however, the parameters needed to capture risk efficiently are not available in many cases.

There have been significant upgrades in technology across companies. Many of them have automated underwriting systems being used. However, most of the underwriters also expressed that the statistical techniques and technology being used for underwriting in India is not at par with other developing nations.

A few underwriters expressed that underwriting should be recognized as a core function by the CEOs. The tussle between the top line (Revenues & volume) and the bottom line (Profitability) while exists, the sales team and the underwriters are able to strike a balance in most of the companies.

The regulator should do its bit by promoting sound underwriting practices, providing flexibility in product wording and specifying minimum required data that must be captured at the time of sale of policy. Guideline rates would help in abetting irrational pricing extant in the market for certain products.

Overall, the industry is moving in the right direction with respect to underwriting. There has been increased focus on technology upgrades, realization of the need for more data capture, storage and analysis and the move towards risk based pricing.