Insurance companies face increased pressure to make the underwriting process more efficient and, at the same time, improve the bottom line.
Q. How are insurers making the underwriting process more efficient to improve profits?
A. Wayne Umland, Glatfelter Insurance Group: Business process automation/management is a key enabler [of efficient underwriting]. The use of business rules engines, implementing workflow efficiencies and accessing information to make better decisions all drive increased bottom-line profit. The closer we get to straight-through processing, the more efficient companies will become. Sophisticated business rules engines, exception-based underwriting, improved analytics for rate modeling, decisioning systems and business process management are critical initiatives.
A. Craig Weber, Celent Communications: It is a balancing act in terms of getting enough data to make an underwriting decision and not so much data that you bog down the process, adding complexity where it doesn't add value. Once you've got the right data, you've got to evaluate that data effectively. For many carriers, business rules engines will drive the next round of improvements. Underwriting is a rational process in which technology can bring consistency and speed.
A. James Taylor, Fair Isaac: The main business drivers that we see propelling underwriting process improvements that will immediately lift profits revolve around three key themes: precision, consistency and agility. Insurers must make more profitable and precisely targeted decisions. Once the best decisions are established, insurers must make the same decisions in the same way, over and over again - regardless of channel. Insurance organizations need to improve their ability to adapt and implement business changes on the fly.
Q. What emerging technologies can help insurers improve the underwriting process?
A. Umland, Glatfelter Insurance Group: The technology required to improve the underwriting process is already here - it is the application and enhancement of technology that will be the key differentiator. Straight-through processing; exception underwriting; integration of systems with the sales force and sales force automation tools; incorporating sophisticated business rules to facilitate underwriting at the point of sale; and the integration of supporting documents, third-party and other internal systems are strategies that will reduce underwriting costs.
A. Weber, Celent: Rules engines are getting better. Improving the amount of control that business users have over rules is important because most rules-based systems are constantly evolving in response to changing conditions. Graphical user interfaces that help users visualize how rules interact will make it easier to develop complex systems.
Straight-through processing also is transitioning from something that people talk about to something that people are doing today, and more participants in the underwriting process are making their services available over the Web in real time.
A. Taylor, Fair Isaac: A new class of integrated and configurable decision-management applications is now available to insurance companies. The applications are comprised of robust analytic modeling or scoring capabilities and actionable rules to immediately execute underwriting decisions and push these decisions to the point of sale. Using advanced analytics empowers insurers to more granularly segment customers based on more accurate predictions of customer behavior. This allows them to determine the most appropriate product offerings and pricing levels.
Q. How are packaged underwriting systems evolving, in terms of capabilities and response to market trends?
A. Umland, Glatfelter Insurance Group: More and more packaged underwriting systems are incorporating the technologies and capabilities we've discussed. The inclusion of rules to streamline the process, Web services and XML for integration with other applications makes it easier to gain efficiencies. These also significantly improve time to market for product and rate changes. Most underwriting systems available today make it easy to collect and gather data to feed data warehousing solutions. Availability of current information and improved analytical tools enable timely and more informed decisions.
A. Darren Klauser, CSC: Web-based technologies make it possible for insurers to improve the accuracy and speed of the underwriting process. They can respond to agents within minutes and dramatically reduce the turnaround time for policy issuance. To reduce the iterative data collection that delays the underwriting process, reflexive questioning technologies allow for the capture of additional data depending on the answers to application questions.
A. Weber, Celent: A goal for the packaged systems is to speed development by pre-integrating all the major underwriting functions, so most include requirements management, case management and rules engines to both guide underwriting workflow and to facilitate underwriting decisions. Again, ease of use is a major concern. Most carriers are trying to limit the amount of IT involvement in development and maintenance of their underwriting systems.
A. Taylor, Fair Isaac: Packaged applications certainly have value in providing templates of best practices, but these applications must also realize that each company's needs are unique and must be customizable. Many insurers are challenged with updating systems, and the idea of replacing existing investments with an entirely new packaged application is hard to swallow, so we see value in providing a framework for insurers to generate their own custom-configured decision-management applications.
Q. How must insurers adapt their processes to leverage next-generation underwriting systems?
A. Umland, Glatfelter Insurance Group: The implementation and exploitation of the features, processes and information will be the more challenging task for many and a cultural shift for some. The availability of current information can be used to more accurately evaluate and price the risk, develop current rating models and quickly adjust rating plans and products. Information that once had to be looked at long after business was written can now be immediately obtained and evaluated. Business rules engines remove people from generic processes and incorporate their expertise into the system.
Building the underwriting process into the system and moving it to the point of sale may be perceived as a loss of control and is a concern for some. It is, however, a key factor in removing frictional costs inherent in older workflows. Creating automated interfaces and integration eliminates the need for multiple points of entry, reducing work and improving accuracy.
A. Klauser, CSC: By being open to new ways of using technology to manage and evaluate information, insurers can position themselves to gain improvements in efficiency and quality. Next-generation underwriting systems take advantage of both improved technology and alternative methods of gathering underwriting information. Combining a well-designed tele-underwriting process with additional lab testing and pharmaceutical data can reduce the reliance on traditional underwriting requirements, reducing new business acquisition expenses and speeding policy issue. Insurers should kick off their underwriting process reengineering efforts with a comprehensive cost/benefit analysis of their current underwriting requirements.
A. Weber, Celent: Underwriting is a key area in which carriers need to improve their "data mastery." Most carriers have immense amounts of historical data tucked away in any number of systems. The hard part is making data accessible and using it effectively to fine-tune your understanding of underwriting risks. The industry needs to make better use of data warehousing and analytic tools. Virtually every carrier could automate at least a third of its underwriting decisions by using technology effectively.
The Experts: Underwriting
Executive Vice President and Chief Information Officer
Glatfelter Insurance Group, (York, Pa.)
Vice President of Life and Annuity Solutions
CSC's Financial Services Group, (El Segundo, Calif.)
Celent Communications, (New York)
Fair Isaac (Minneapolis)
Peggy Bresnick Kendler has been a writer for 30 years. She has worked as an editor, publicist and school district technology coordinator. During the past decade, Bresnick Kendler has worked for UBM TechWeb on special financialservices technology-centered ... View Full Bio