Thinking Inside the Box

Despite the fact that commercial insurance companies sell a product, it is an intangible product, and brokers tend to choose their preferred carriers not only based on price and coverage, but also based on relationships and service. At a time when companies are mindful of expense reductions, premium growth and improved underwriting results, getting them to invest in technology to increase service – and in turn increase revenue and profit – is a hard sell in a soft market. But when you work in the service industry, sometimes in-house operational enhancements and increased distribution solutions are not enough. Sometimes a little investment in technology to automate underwriting service can go a long way.

Speed and Service

Once upon a time, a one-month turnaround time on any given submission, regardless of size, was acceptable service. Relatively speaking, premiums were much higher than they are today. Accounts were re-marketed every three years. Submissions trickled in by fax, Internet connection sharing (ICS), or in giant padded envelops with spiral-bounded documentation – including a personalized cover letter, an executive summary, a few application forms, financial statements, contracts, claims reports, etc., all separated by colourful tabs. Quotes and binders were faxed and policies went out by mail. Thus, the total account turnaround time ranged anywhere from one to six months from the moment a submission came in, was underwritten, quoted, bound and issued manually. That was about 10 years ago, and this was a-okay at the time.

Fast forward to a few years later. Accounts were being re-marketed every two years or so. Premiums were dropping slightly, but were still interesting. And even though submissions were not prepared with as much love and care as they used to be, applications would still make their way over to an underwriter by fax or by mail, and a two- or three-week turnaround time was average. Documentation was still manual and sent out the same way. The total service time was a few months, which was still adequate.

Now let’s have a look at the last few years. Premiums are less interesting, yet the marketplace is even more competitive. Packaging of extensions, including the broadening of wordings, is on the rise. New capacity is available in the marketplace every year and insurers want everyone’s new and renewal business. Every submission that has been re-marketed over the last four years is still being remarketed again this year. These submissions arrive by mass generic emails, fast and furious, with as little information as possible. Quotes, binders and policies are still prepared manually, but their delivery is expected to be instantaneous thanks to email. Expectations are high and patience low. For a submission that came in this morning, a quote is expected yesterday evening. If it binds this afternoon, the policy should be ready by the morning, right?

Underwriters feel the pressure. No matter how risky the risk, how small the premium or how busy the underwriter, every carrier needs new business not just to grow, but to survive. So we cut corners, sacrifice a little underwriting, maybe even verbally throw out indications over the phone or by email to save time – and hope for the best. But this new way of doing business isn’t necessarily the right way, and making sure your service to your brokers is top notch doesn’t mean your underwriting talents should go to waste. Alas, the systems in place to help underwriters underwrite, and help operations staff process, haven’t changed in the last 10 years, despite the fact that everything else has.

So here comes the challenge: how do you keep your underwriting integrity, grow your new business book while retaining your existing renewal book – all the while increasing your service to brokers – without hiring new underwriters or operations staff to handle the excessive marketing and re-marketing? Most department meetings will likely encourage their teams to “think outside the box” to come up with solutions. But the actual solution is simple: think inside the box.

Inside The Box

We can take a cue from the banking industry in the benefits of thinking inside the box. There used to be a time when everyone waited in a queue to see a teller for anything and everything from depositing a cheque, to paying a bill, to getting pre-approved for a mortgage, etc. We all had to wait in line for the same amount of time, no matter how big or how small the transaction. That is, until the banks came out with a solution to better service their customers: automated telling machines or ATMs. If the transaction you needed could be done without a teller, you were more than welcome to use the bank’s automated teller machines. But the progress did not end there.

Shortly thereafter, Internet banking further improved service. By defining a set of rules for a ‘box’ that could be automated online, the banking industry realized that if they made certain transactions “transactional,” they could save time and money; better yet, they could keep their customers happy. The insurance industry as a whole should subscribe to the same logic. If certain accounts historically represent a lower risk at a lower premium, and an underwriter doesn’t really need to underwrite it, then make it fit into a box, automate it and put it online.

“Online” is not a 4-letter word

I was once told “underwriting is an art, not a science.” In as much as this is true, some processes of underwriting can be simplified, compacted, predicted and therefore automated. By creating a “box” of questions, complete with its own underwriting rules and premium rating matrix, and coding this box within an online quoting system, a broker can have access to your service and products with instant turnaround – as long as their accounts fit into that box. At the end of the day, this would benefit both underwriters and brokers, by making smaller, more predictable insurance coverage “transactional.”

The best part is that automation is like magic. You don’t have to stop at just an online quote. Once you create a box to handle small transactional accounts for your department, the capabilities are endless. Why not go a few steps further to sweeten the box? How about a situation in which your brokers not only get an automatic quote, but they can also get an automatic binder and a complete policy including endorsements issued – all online.

With all of this “automation online” talk, it’s important to note people are generally afraid of technology because of its ability to make us feel obsolete. The first time I worked on creating an underwriting box so that small companies could go online and make their service more efficient, I was troubled by what the use of technology in underwriting would mean in general. I had just finished running though the first test account on the pilot system with my manager. Seeing the system react exactly as I would have, by slapping on the appropriate exclusions, putting on the right enhancements and even quoting it with the exact same premiums that I would have quoted in-house, I felt shivers. If I had hairs on the back of my neck, I’m sure they would have stood up. I remember looking at my manager and saying: “Did I just lose my underwriting job?”

The bad news is that, after that, my life as an underwriter was over. But the good news is that I was given the responsibility of automating the small business for the department. Ever since then, I see no reason why small premium accounts that usually have the highest volume shouldn’t be automated online. That gives underwriters more time to focus on more complex accounts, and gives brokers what they want and need instantly – quotes, binders and policies.

Let’s go back to the banking example. Even though ATMs are everywhere and most people do their banking online, tellers are still in every bank, in every branch and on every corner. Tellers haven’t become obsolete. Certain transactions still require someo ne’s expertise, advice and service.

The same holds true of insurance. Even though a company might decide to automate a few areas of each department, underwriters are still needed to work on the medium to large accounts – those with a little more hair, a little more premium and a little more risk. These areas tend to need more of an underwriter’s time and service. They are the exact areas in which markets should be differentiating themselves, with companies showing off their underwriting forté.