The concept of mitigating risk has been around since the early days of insurance when deals were made at the pub or coffee house, and sealed with a handshake. Granted, the insurance industry has come a long way since then, but some processes are still stuck in the Dark Ages. Loss control and inspections, which were devalued in the prolonged soft market of the 1990s, are now essential components of insurance company underwriting practices.

The inspection process impacts performance, but it can be especially profitable for property/casualty insurers to improve loss control. The archaic patchwork of systems many insurers still use lock critical data in unusable formats, thereby drowning underwriters in paperwork and limiting operational efficiencies. Therefore, it makes sense that since the technologies and processes running insurance inspections and loss control have been stuck in a holding pattern for decades, this is a logical place to start looking for ways and means of improvement.

Upon examination, insurers will find that in lines of business ranging from marine and homeowners to commercial property and liability, their underwriting departments are overwhelmed by the flood of incoming paper inspection reports. The problem is compounded by a lack of standardization of data. Many insurers see the inspection process as a competition, but they shouldn't look at it in this way. One is not better than another when standards are in place to make the information uniform from company to company.

Additionally, with information buried in hard-to-access files and formats, data mining capabilities are almost non-existent. Thus, data that could significantly impact an underwriting decision goes unused. And, the risk-assessment process is never seen by those who could make a difference.

While many insurers talk about streamlining or improving risk assessment and underwriting, few have taken advantage of technology solutions that can integrate loss inspection reports into workflows and create a standardized way of collecting and deciphering information.

In-house and external inspectors collect vital information about the risks insurers want to potentially underwrite. Because there is a mix of in-house and outsourced practitioners, information is not always collected in the same format and, in fact, the process is more subjective than objective, depending on the inspector. In this day and age, subjectivity should not be the basis for assessing risk.

STANDARDS

Accordingly, broad standards should be in place and used by everyone in the field. Once the standards have been designed, the whole process should be system driven, ultimately providing underwriters with consistent information from risk to risk. By having standards in place that are system-driven, the process is more tightly controlled and streamlined.

All data will be collected the same way regardless of who is performing the inspection. Once templates are complete, the data can be uploaded automatically, providing clear data for assessment in a more efficient and effective manner. Not only that, but you can run reports on this data to provide accurate information about the types of risks you are insuring, enabling better future underwriting decisions based on an accurate assessment of the risk profile of your book of business.

Technology plays a key role in making more accurate decisions with your insurance inspections and providing a standardized way to collect data. The days of paper-based processes with missing information and prolonged lag times to close can be a thing of the past.

By standardizing your risk assessment criteria and combining it with Web-based data transfer, you can dramatically reduce your cost per inspection. Mobile technology can be used by anyone, regardless of where the risk is located to allow remote inspectors the same tools and accuracy of inspection.

Why not give your inspectors the tools they need to manage your processes more efficiently? You don't have to be Inspector Clouseau to find the right solution to save you money, time and provide your decision-makers with more accurate, timely information.

Dave Hanley is the VP operations and business development for Toronto, Ontario-based Insurance Systems Inc.

For more about risk assessment, search "Pricing Is The Sweet Spot" at ww.insurancenetworking.com.

(c) 2009 Insurance Networking News and SourceMedia, Inc. All Rights Reserved.

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