The concept of front office underwriting may sound like an oxymoron, but year after year, agents and other distribution channels are given more underwriting responsibility.

Many carriers, especially those who work through independent agents, have relied on their agents to do front-line underwriting for a long time, says Karen Pauli, analyst at TowerGroup Inc., Needham, Mass. “The carrier would put underwriting guidelines out there, educate the agents and expect the agent to underwrite the risk based on the requirements,” she says. “But, the real serious underwriting was done when the application hit the company. Carriers have extended the binding authority under the assumption that the agent would underwrite the risk up front, but now, from a personal-lines standpoint, the leading carriers have so much technology loaded behind the application process that it’s almost instantly underwritten.”

Deborah Smallwood, Smallwood, Maike & Associates, sees advancements in technology helping the underwriting process. “When the industry wanted to automate underwriting, quoting and straight-through processing, the vendors in the marketplace took the policy admin systems and moved them into underwriting and said, ‘here, we already do data capture, and we provide rate and quote.’ That was a misalignment of what underwriting needs. Now, technology has advanced with the collaboration of uploads and downloads between agents and underwriters, underwriting work stations concepts, and all the data coming to the underwriter and then facilitating straight-through processing and exception processing.”


The desire for carriers to improve customer service plays a large role in the underwriting shift. “If you don’t make things easy for an agent now, they’ll just go somewhere else,” Pauli says. “Leading-edge carriers are really pushing technology because they want to make certain that the best agents choose them over some other carrier. In order for the agent to make that positive choice, the whole process of application and decisioning needs to be easy, and the technology is the only way to make that happen.”

Peerless Insurance Co., Keene, N.H., introduced Personal IQ SmartRisk, an underwriting tool that provides real-time quote and submission capability for personal lines automobile and homeowners new business and endorsements. “Predictive modeling is basically what it does for us in terms of pricing business, but we’ve also tied in an automated rules underwriting process, so it does select business on the front end for agents to streamline the rich selection and issuance process,” says Victor Pepin, VP of personal lines underwriting at Peerless. “The two are really hand-in-hand when it comes to underwriting and pricing.”

IQ SmartRisk enables agents to use a number of real-time vendors with whom Peerless partners to get real-time quotes, according to Pepin. It runs through a set of rules, and enables the agent to determine eligibility. It then returns to the agent a real-time quote. The agent can then decide whether or not they want to proceed with issuance.

The commercial side of Peerless uses a similar application, Commercial IQ SmartRisk. “We introduced a component predecessor of this product around 2001, and that was the automated application submission component, which gave the agent an indication of the underwriting acceptability and an indication of the pricing,” says Linda O’Donnell, VP of commercial lines underwriting. “We’ve added functionality, starting with automated rules to determine risk acceptability and predictive modeling to determine risk-specific pricing, functionality and whether the rules are there, and agents can get the final determination on both underwriting desirability and pricing for many risks.” If a final indication is not provided, the agent will receive some guidance on how the underwriter will view the risk. 

On occasion, personal property lines risks will be reviewed by the underwriter, however the majority of Peerless’ property lines business goes through unattended. “This new environment really streamlines that whole process and automates it all on the front end,” Pepin says. “Initially there was some concern among our agents about not interacting as much with their underwriters, but now they’ve found that there’s less need to contact them, though they’re still available should they need to make contact.”

Peerless’ commercial lines has seen an uptake in submissions and number of policies sold, which O’Donnell attributes to SmartRisk’s ease of use from an agent’s prospective. “We give them information during the application submission process on the desirability of that class of business and some of the issues involved so we can help them through the underwriting thought process as they’re submitting the application. There are more efficiencies in the process—less screen entry and data entry work. Our hit ratios have gone up because the submission process is easy, and the agent receives a quick underwriting decision and quote.”

One of the main differences between personal lines and commercial lines, O’Donnell says, is that in many instances on the commercial side, the system is doing a lot of the pre-underwriting and pre-pricing, but the final decision still resides with the underwriter in a certain percentage of applications.

San Diego-based ICW Group also plans to enhance service levels with its agents through the Underwriting Management Systems (UMS) from Lexington, Mass.-based FirstBest Systems Inc. The solution addresses the entire underwriting lifecycle in an integrated platform. ICW has implemented the first phase of the FirstBest solution for workers’ compensation, and is considering it for its other lines of business. “It has provided ease of use, and pushed the risk assessment and underwriting rules to the front office,” says Smallwood, who was ICW’s chief transformation officer at the time of the UMS implementation.

UMS has a workflow and rules engine that supports straight-through processing for submission and exception processing, according to Smallwood. “From an IT perspective, the architecture is adaptable and configurable. It easily integrates ICW current and future environments.”

When ICW evaluated FirstBest, they saw there was an alignment to ICW’s strategies and plans, which included focusing on efficiency and effectiveness.


Automated underwriting doesn’t just help the agent. Carriers can get better data into their systems and enable them to improve how they manage their overall enterprise exposure better, according to TowerGroup’s Pauli. “It’s consistent and quick, so you book your premiums quicker, and your portfolio is up-to-date in terms of your overall corporate exposure.”

About two-and-a-half years ago, San Diego-based Anchor General Insurance Agency Inc., a non-standard private passenger automobile liability and physical damage coverage provider, recognized the need for efficiency and consistency and took steps to achieve that.

“The goal was to become more efficient in our processing,” says John Amat, VP of IT. “Nonstandard business is a very competitive market; we’re competing with larger companies that have bigger dollars to spend, so we decided to make an investment in order to stay competitive.”

Anchor General is currently using DM Assistant from Honolulu-based Decision Research Corp. for its agency auto point-of-sales process in Texas, California and Arizona. “We’re underwriting up front at the point of sale so we can evaluate risk and accept that risk or submit it for an underwriter to look at,” Amat says. “Traditionally the underwriter looks at every risk coming through. We found that at least 80% of that business is pretty clean, so we wanted that underwriter to focus on the other 20% that really needed someone to review and process it.”

Amat’s challenge was to find high-quality technology that the underwriters and agents could use. “Automating this process was a big risk to our loss ratio, and you can start to lose grip on those because the technical people don’t understand the underwriting aspect,” he says. The DM Assistant is Microsoft Excel-based, which is easy to understand, Amat says. Now, Anchor General underwriters are programming the rule books.

Rules have always played a large role in underwriting, and still do so with automated systems. “Traditionally you had to send out memos, and make sure all the underwriters got them,” Amat says. “But with automated underwriting, you can make a change in your rule book and get that into production within minutes and with consistency.”

Peerless’ Pepin also sees benefits in the ability to change the underwriting rules on the fly. “We’re continually reviewing and fine-tuning the rules—evaluating ways to improve our pass rates to become operating as efficiently as possible,” he says.


Leading-edge carriers are using portals, which have been around for years, to enable real-time integrated, fully functional underwriting, according to TowerGroup’s Pauli.

That’s exactly how Tower Hill Insurance Co., Gainesville, Fla., plans to enable its agents to work for its homeowners line of business. Currently, an agent logs into the ratings section of the portal, types in an address, which gets geocoded, and it then provides coverage options, according to Brian Elsmore, CIO at Tower Hill. “That is a sub-second rating for which we’ve returned rates. The agent selects the company, goes through their endorsements, rewrites the policy in real-time and continues on through personal information,” he says.

Elsmore is planning even more technology advancements within Tower Hill’s underwriting process, starting with implementing an underwriting assistant technology to enable more decisions to be made in close to real time while weighing whether it’s going to be a good risk or a bad risk. “Today, we inspect all of the risks we take, but not every single risk is a risk that we need to look at in terms of underwriting,” Elsmore says. “We’re trying to have an underwriter look at only the necessary risks. That is where technology is taking us today.”

Most will agree with Elsmore that underwriting technology is taking the industry to new places. For Peerless’ Pepin, underwriting technology is delivering new business. “We had a record new business year in 2007, due in large part to the more sophisticated pricing methodology that we’re using with Smart Risk,” he says. “We’ve seen our new business almost double, and quote activity has more than doubled.”

Whether the technology is delivering new business, producing cost savings or providing customer service, one thing common among these benefits is they’re likely what insurers want.

Register or login for access to this item and much more

All Digital Insurance content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access