Large insurance carriers that underwrite commercial lines face a daunting prospect when managing complex risks. Risk calculations are based on many moving parts, including varying levels of underwriter experience, data quality, market conditions, third-party data sources, and of course, fluctuating risk appetite. And then, if that weren't enough, the policy administration, claims and rating systems may not to talk to each other.
To add pressure, management and shareholders seek to lower combined ratios through smarter underwriting. With investment income no longer a reliable way to improve operating ratios, it's necessary to improve risk selection, pricing and business processes to deliver more predictable returns. So, CIOs and underwriting executives are deploying integrated, collaborative front-office systems. Flexible, rules-driven underwriting technologies can tie systems and people together across lines of business and geographies. In seeking to automate and integrate their underwriting systems, insurers hope to improve:
* Productivity: A properly designed and integrated system can increase underwriting capacity without necessarily increasing the insurer's head count. By using automation to deal with high- volume routine business, experienced underwriters can spend more time evaluating complex accounts where their knowledge and expertise adds real value.
* Scalability and Agility: By managing more accounts and maintaining or improving underwriting quality, insurers can grow and scale their business without a corresponding cost increase. They can make better use of existing staff, grow their portfolios and quickly enter new markets.
* Collaboration: Ideally, underwriters and managers should be able to coordinate account activity. An agile, integrated system provides notifications so they know immediately when an activity is overdue, or when it has been completed.
* Enterprisewide Knowledge: An integrated system provides a single current and historical view of the insured's account across the enterprise. This not only helps underwriters analyze and price each risk, it helps manage overall risk across multiple lines.
* Agent/broker Service: By speeding responses and providing agents and brokers with visibility into their books of business, the carrier can improve service, become the carrier of choice and win more business.
While the benefits of underwriting automation are significant, there can be obstacles to implementation. As with other business processes, automating aspects of underwriting isn't a stand-alone event. In seeking the maximum benefit, insurers should look at the big picture, including interfaces with policy admin systems, the state of relationships between underwriters and agents or brokers, and the flow of work as requests come in and are processed by underwriters.
Experienced underwriters add value to risk selection and pricing and may be resistant to change. They may keep vast quantities of information in their heads, and insurance executives need to make it clear that they won't be replaced by a machine, but rather that automation will make their jobs easier, allowing them to concentrate on the most challenging risks with better data.
Enterprise IT departments may present roadblocks. Successful deployments require multiple integrations. Further, communication between IT, underwriting and other departments may be less than perfect. It's important to determine and prioritize the best integration points and plan for phased integrations. This is particularly true with legacy systems, which may not be configured to deliver the quantity and quality of data needed to automatically process routine risks.
Underwriters must often reenter data to and from multiple systems and rely on an employee base that is nearing retirement. Carriers need a system that captures knowledge from experienced underwriters and applies those best practices across the organization. Equally important, the underwriting system should marry risk data with third-party data and analytics, supported by business rules and workflows that ensure quality and speed from submission, to quote, to bind.
There's tremendous interest in underwriting automation. According to research and advisory services firm Strategy Meets Action, 88 percent of carriers are investing in underwriting automation today. Helping underwriters understand the benefits of automation is an essential element of success. Effective implementation can help insurers improve service, provide more accurate pricing and increase the overall agility and flexibility of the enterprise. These strategic improvements can yield business agility and excellent return on investment for insurers with a well-designed implementation program.
John Belizaire, founder and CEO of FirstBest Systems, and Gino DiGregorio, leader, policy services, North America for Accenture Property and Casualty Insurance Services.
