In last month's supplement on underwriting, production glitches resulted in several errors in the "Industry Speaks" section. The corrected responses appear below.How can insurers employ analytics and business-rules technologies to improve profitability?
David Pedersen, Insurity: You've heard of things being "dumbed down"? Analytics and business rules smarten things up. The integration of analytics and rules engines into the underwriting process increases efficiency and profitability. Using predictive and descriptive modeling, insurers can be more selective in accepting risk-more successful in determining pricing and premium modifications based on relevant risk factors. Because analytics and rules engines yield knowledge that is both codified and automatic, underwriting efficiency and discipline are increased, while underwriting expenses are reduced.
With many carriers reporting their first underwriting profit in years, how can they sustain this profitability when the market softens?
David Pedersen: By maximizing processing efficiency now. In 2004, Datamonitor found 54 percent of insurers surveyed cited efficiency as a primary driver for their IT strategies-up from 34 percent in 2003. The key is straight-through processing. Automating the policy process flow on a single platform-from application underwriting to claims administration and adjudication-then populating the flow with all requisite data, from various sources, shortens cycle times, reduces human intervention, eliminates redundancies, increases accuracy and productivity, and reduces expenses.
What can insurance companies do to streamline workflow and reduce paperwork in underwriting?
David Pedersen: It's essentially the same answer. By putting all transactions and policy-lifecycle processes on one platform-complete with automatic, electronic forms-generation and user-defined workflows-workflow is streamlined, and paperwork is reduced. As a bonus, because of the common platform, integration and maintenance worries virtually go away. Populating those processes with pertinent, accurate data also reduces paperwork and time-consuming solicitation of information, even as it improves risk-acceptance, reduces losses, and improves results and expense ratios. That's what underwriting's all about.
How are carriers using Web-based technologies to improve underwriting?
Eric Lien, AQS Inc: Web-based technologies allow carriers to give business partners the ability to complete the underwriting process in real-time. The wait for the submission of paper or fax applications is eliminated, and programmed underwriting rules can be used to automatically validate data within the system to help prevent mistakes and omissions. Web-based technologies are more efficient to maintain and deploy than legacy solutions that utilize a Web-enabled front-end to expose core business processes. Web-based solutions with imbedded workflow capabilities also provide the base for additional operational productivity gains.
How can rating, scoring and valuation technologies help insurance companies improve their loss ratios?
Steven C. Craig, ISO: There is really nothing new or mystical in these technologies. What is changing is how these technologies are being implemented, as well as improvement in the technologies themselves. Companies need to work with the providers of these products to continue improvements and enhancements. Scoring variables from multiple products and combinations of product are being combined and data from different sources are being brought together to feed rating systems differently, generate new types of scores and continue the process of converting data-to information-to decisions. Consistent and efficient application of these technologies will improve loss ratio and overall book performance.
