Revolutionizing underwriting: the impact of digital data intake on risk assessment

The assessment and management of risk in the finance and insurance sectors are undergoing a huge change, driven by the shift from traditional, manual underwriting methods to advanced digital data intake processes. 

Let's dive into the historical context of underwriting practices, their limitations, and the advancements brought about by digital data intake, as well as the growing potential of no-code solutions.  

The evolution of underwriting

Risk evaluation for clients and customers in the finance and insurance sectors has undergone major changes over the years in terms of practices, methodologies, and technology. 

Historical underwriting practices and their limitations

Traditionally, underwriting has been a complex, time-consuming process. To fully assess the risk for each client, underwriters had to manually identify the data they needed from different sources (such as the applicant’s background, financial status, etc.) and then process and analyze the data in spreadsheets. 

This type of assessment tends to be error-prone and inconsistent since it relies on the subjective interpretation and judgment of the underwriter. 

In addition, data has traditionally been collected using PDF forms and then manually entered into the system and verified - a resource-heavy, time-consuming process that also tends to result in inconsistencies and errors.  

Shift towards digitalization

Digital technology has dramatically transformed underwriting - specifically the advent of digital data intake, data analytics, artificial intelligence, and machine learning. 

These technologies have enabled more accurate risk assessments, faster processing times, fewer errors, and greater consistency when it comes to decision-making. 

Digitalization has also vastly increased the amount and accuracy of data that’s available for analysis. This additional data, which includes real-time data, not only improves statistical confidence but also enables additional downstream capabilities including, the ability to provide more personalized products and services that can meet financial and insurance customers’ needs on a more granular level.

Digital data intake: A game changer

Digital data intake refers to the process of gathering customer data via digital channels (like websites, mobile apps, and social media). The data is then automatically processed in the system, verified, and stored electronically. 

The type of data collected can include personal and financial information, as well as real-time behavioral data, depending on the technology platform used. 

Digital data intake in the context of underwriting

Digital data intake completely changes how underwriters assess risk and make decisions. 

The process begins when a client submits their application via a digital platform. This information can include personal information, financial statements, business details, and other additional data points needed by the underwriting department to fully assess the risk. 

Once digitally entered, the information is then automatically processed and organized into a format that can be easily analyzed. The data can then be easily accessed for analysis by underwriters as well as risk assessment algorithms. 

Digital data intake also makes it easy for underwriters to get up-to-date information, since data is updated in real-time. 

The benefits of digital data intake

Integrating digital data intake into the underwriting process provides several advantages to both insurance companies and financial institutions. 

Enhanced risk assessment

Digital data intake means that accurate customer data can be quickly collected, verified, processed, analyzed, and stored. This allows companies to scale their customer application and intake process, resulting in large amounts of accurate data. 

Accessing these vast amounts of data provides underwriters with a far more comprehensive view of the customer’s risk profile. Digital data intake also enables the gathering of diverse data points, which can be analyzed for patterns and risks. This enables risk assessments to be more personalized and nuanced for each customer. 

Time efficiency

As mentioned above, traditional data collection and entry is extremely time-consuming, prone to errors, and resource-heavy. On the other hand, digital data intake swiftly captures and processes data. This also makes it possible to capture far more data, way more quickly, enabling underwriters to reach decisions far more quickly, which then positively impacts application processing times and loan approvals. 

Cost reduction

There are several ways that digital data intake lowers costs for insurance and finance companies:

• Lower labor costs by reducing the need for manual labor
• Fewer defaults or claims due to increased accuracy in risk assessment 
• Increased scalability without increasing costs, since more applications can be processed in less time
• Lower operational costs due to digital data storage and management, which are generally more cost-effective compared to traditional paper-based systems

Challenges and considerations

Digital data intake provides massive benefits for underwriting, however, several issues must be taken into account when deciding on the right solution.

Data security and privacy concerns

Companies need to be able to ensure the security and privacy of the data collected. As the volume of personal and financial information that’s collected increases, so does the risk of data breaches. It’s important to choose a technology platform that complies with the data protection regulations, which can vary according to region. 

Cost and complexity 

The transition from traditional to digital tends to be far more difficult than anticipated, especially in terms of the development phase. For example, over half of IT projects aren’t delivered on time, reflecting the difficulties in managing these transformations. Since starting each project from scratch is simply not scalable, the focus of many insurance and finance companies is shifting towards no-code platforms. 

No-code platforms are faster, more cost-effective, and require less effort from IT teams and business users. No-code platforms, especially ones that understand the insurance and financial industries, enable the rapid deployment of digital solutions without the need for extensive coding knowledge.

Building an end-to-end data intake process

Another significant challenge is ensuring that the digital data intake process can integrate with multiple applications, creating a unified process. In fact, 70% of organizations don’t provide completely connected user experiences across all channels. 

The issue lies not only in the technical integration but also in ensuring that the user experience remains consistent and efficient across different touchpoints.

Conclusion

The shift from traditional, manual methods to digital data intake has made a significant impact on how companies assess risk and make decisions.

• ‍Enhanced risk assessment: More accurate, personalized risk profiling, using diverse data sources for comprehensive risk analysis.‍
• Time efficiency: Faster underwriting process, increasing scalability and delivering better service to customers.‍
• Cost reduction: Substantial cost savings, both in terms of operational expenses and reduced risk of defaults or claims.‍
• Challenges and considerations: Digital data intake brings challenges such as data security and privacy concerns, the complexity of transforming existing processes, and the need for seamless integration across multiple platforms.

The potential of no-code solutions in transforming these processes is huge, offering a scalable, cost-effective, and user-friendly approach to digital transformation for underwriting.