This piece is by Adrian Coupland, Head of Insurance for Europe, Earnix
The forecast for underwriting profitability in 2025 is strong. Analysis from the Insurance Information Institute (Triple-I) suggests that underwriting margins, which improved in 2024, are expected to continue strengthening into 2025 and 2026. This is a welcome trend for insurers, but it also raises an important question: how can we ensure that this improvement is sustained?
The answer, at least in part, lies in how we harness technology. There is an ever-growing push to adopt advanced pricing models and software solutions, which can deliver optimal pricing based on vast datasets and predictive analytics. These tools are invaluable, but they should not be the ultimate decision-makers. At the core of insurance underwriting is human expertise – and that is something no algorithm can fully replicate.
Data Supports, But Underwriters Decide
Underwriting is a discipline that has evolved over centuries, built on deep expertise, experience, and an innate understanding of risk. While pricing models can aggregate historical data, identify trends, and even predict likely outcomes, they cannot account for every nuance of a complex risk landscape.
The best underwriters have a feel for market conditions, an ability to assess intangibles, and a skill in adapting to emerging risks that simply cannot be programmed into software. They can spot opportunities others miss, adjust pricing strategies based on real-world insights, and exercise sound judgment when and awareness of the human nuances of market conditions, such as pricing to retain business. This is why pricing software should support, not dictate, underwriting decisions.
The Limits of Historical Data
One of the biggest challenges with purely data-driven pricing models is that history is a limited predictor of the future. Past performance is undoubtedly useful in identifying trends, but it does not account for sudden shifts in the market, regulatory changes, or black swan events. If history were a perfect guide, insurers would have been better prepared for the COVID-19 pandemic, the rapid escalation of cyber risk, or the acceleration of climate-related claims.
This is where underwriting expertise becomes critical. Underwriters bring an informed perspective that allows them to challenge model outputs, apply judgment, and make decisions that account for emerging risks in ways that historical data simply cannot.
Striking the Right Balance
Technology should be seen as an enabler, not a replacement for human expertise. The best pricing software enhances underwriting by:
· Reducing volatility and providing a data-driven foundation for decision-making
· Ingesting relevant datasets and identifying pricing trends and underwriting opportunities more efficiently
· Offering scenario analysis to stress-test different assumptions
However, it should never override an underwriter’s final decision. If a pricing model suggests a premium that an experienced underwriter knows is too low or too high given the current market landscape and their position with it, they should have the ability – and the confidence – to challenge it.
Involving Underwriters in Tech Development
To get the best from pricing technology, underwriters should not be siloed from its development and deployment. Too often, software is designed and implemented without fully understanding the practical challenges underwriters face. The best solutions are those co-created with underwriters, ensuring that technology aligns with their needs rather than imposing rigid structures that hinder flexibility.
The key is to listen to underwriters and ensure that technology is built to complement their expertise. By doing so, insurers and their technology partners can create a pricing ecosystem that is both data-driven and adaptable, supporting stronger underwriting decisions rather than dictating them.
The Future of Underwriting: Expertise + Technology
As we look further ahead for 2025 and beyond, the most successful insurers will be those that strike the right balance between technological innovation and underwriting expertise. The conversation should not be about replacing underwriters with algorithms but about equipping them with the best possible tools to refine their decision-making.
A strong underwriting outlook is not just about having the best data – it is about knowing how to use it.
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