Two Sides of Same Coin

In the quest for competitive advantage, growth and cost control, insurance carriers at the top of the performance spectrum consistently have one thing in common: they recognize the importance of superior underwriting as a source of market differentiation.

However, many insurance carriers are under the simplistic impression that underwriting equates to policy administration. As a result, they may assume the systems that support underwriting activity are the same as those that support policy administration.

This is a false assumption.

In fact, effective underwriting demands distinct, modern technology to drive efficiencies and flexibility, enabling proactive response to the changing marketplace. Such technology would be free of the constraints associated with being embedded within a policy administration system.

The most significant improvements to underwriting effectiveness come from two sources: technologies external to policy administration systems, and the management of underwriting and product rules.

POLICY ADMINISTRATION SYSTEMS

Why don’t policy administration systems support underwriting? Policy administration systems were built to an internal focus, with user interfaces designed for insurance experts and people proficient with in-house practices, terminology and processes. These systems are stable, dependable and long-lasting, built to maintain current products and customer information, and to provide such data to underwriting service representatives quickly.

However, while these functions are essential, the systems designed to deliver them have their limitations and weaknesses. They are unyielding and difficult to modify, often using outdated, poorlysupported programming languages. Code changes are complex and lengthy, demanding the business process expertise of large multi-disciplinary teams. Testing regimes are arduous, time-consuming and difficult to track and monitor. Business users are unable to make changes to such a system, user interfaces cannot be readily altered, and non-experts cannot use the system at all. Haphazard growth can result in silos forming, with resultant poor data-sharing and incompatible coding. Reporting and performance metrics become extremely limited.

In contrast to the nature of these systems, however, underwriting is a vibrant and volatile activity, with market conditions, rates, rules, product configurations, customer needs and mix all changing rapidly and frequently.

Underwriting factors change daily, not quarterly. Superior underwriting demands uniqueness and differentiation, not sameness and predictability. Underwriting applies judgment based on data from multiple sources — integrated and shared — not data buried in monolithic rigidity.

SUPERIOR UNDERWRITING: WHAT IT DEMANDS

To be a top performer demands:

Cost effectiveness

Underwriting activity is a controllable, manageable cost, best achieved through submissions management, underwriting collaboration and a focus on underwriting — not the administration of information and data entry and a battle with incomple teness and inaccuracy.

Readily available rules, procedures, rates and pricing

Managed workflow prioritizes submissions, evaluations and decisions executed quickly and cost-effectively. Instant data retrieval means moving faster than the competition.

Ease of use

Policyholders and brokers need a user-friendly, accurate system at the point of sale — in a broker’s office. The system must catch errors when editing fields or submitting completed work. Automated underwriting is a major advantage, and is now available for the majority of personal lines, with varying types of commercial products close behind.

Ease in new product rollout and current product improvements

As business changes rapidly, there is an increasing demand for speed and accuracy in the movement of new products from conception to rollout, and in changes to existing products.

Smooth collaboration and information sharing

Complex underwriting requires multiple underwriter involvement, approvals and reviews. This demands centralized and accessible information with automated notifications, routing and auditing.

Submission pipeline management

Proactive management of sources of business, success in quoting, speed to process and respond to market needs.

NEW SYSTEMS: THE REQUIREMENTS

To enable carriers to best achieve superior underwriting, new systems are required. They include the following:

Personal Lines

Producer-facing sales and service applications

A system to apply underwriting and workflow rules to the point of sale (a broker’s office) will deliver a sales and service advantage, and now is critical to support personal lines underwriting. Such a system makes use of connectivity tools and the automation of underwriting.

Connectivity tools Commonly used between independent brokers and insurance carriers, these tools are required to connect people and technology automatically in real-time to:

• improve accuracy, and eliminate transcription errors and omissions, and

• speed up application and policy processing — which is particularly important in a competitive market — as information is smoothly transported to and accessed from third parties.

Process Automation Tools

The automation of processes — such as rating, the application of rules, pricing, and risk assessment for standardized personal lines or small commercial packages — reduces training demands and minimizes the risk of exposure to errors and omissions. Such automation is highly valuable at broker point-of-sale, early enforcement of eligibility, product, segment, rating, underwriting and data-correction rules.

• Often labelled “automated, exception-based underwriting,” the application process is partially automated so that only exceptions, triggered by the rules, are examined by a person.

• Policies can be quoted, bound and issued — or modified and edited — automatically. This applies particularly to personal lines and small business commercial.

Commercial Lines

Case management tools

Software applications are required to enable multiple underwriter access, shared data, case and workflow management and the use of alerts.

• Complex commercial and specialty lines cannot be handled without collaboration, since multiple experts are needed and policies must be reviewed, edited and frequently modified. This is especially true in areas of assessment of risk exposure, multiple rating and pricing and geographic diversity.

• The need to reduce processing times necessitates access by multiple underwriters, and with channel partners.

Collaborative management tools

These enable multiple members of the underwriting team, third parties and internal specialists to marry the rules, workflow and decisions associated with a complex underwriting prospect. These tools:

• focus on the steps to underwrite new commercial business, so workflow is smoothed and efficient;

• enable effective management of authority and approvals by type of business, monetary value, and risk; and

• collect and store checks, verifications and external data in a centralized position, accessed by all.

Content Management Tools

Applications that can edit, capture and store all forms of information to an underwriting function.

• Policy systems store data, but underwriting requires content to be attached to an account. This could include relevant digital content or other elements of the documentation process.

• Brokers can attach photographs of risks. Text file attachments in XML (such as credit reports) can be re-formatted for viewing and rules can be applied against the content.

Personal and Commercial Lines

Underwriting Workstation

A central workstation with software to support underwriting functions and maintain underwriting functionality and data. This system enables:

• access by the underwriting team to consider all elements of the underwriting function;

• the smooth, effective and accurate rollout of new product, rates, or risk categories without multiple system changes. Information is readily reviewed, tracked and managed;

• the monitoring, measurement and numerical charting of the submission process. This allows line managers to understand which products or segments attract the best business and which ones could be developed further. It helps in the evaluation of bottlenecks in the underwriting process, identifies which brokers attract the best business, and can be used in assessing how risk management could be improved; and

• the numerically-based routing and load-balancing of work for underwriters in larger firms.

CONCLUSION

Underwriting and policy administration are two distinct functions, requiring distinct systems and technology. Superior underwriting is a prime differentiator, and can position you ahead of your competitors. Look for technologies that best address your needs and which underwriting processes are in place to meet them. Systems suited to maximizing underwriting effectiveness are in place and can prove far more cost effective than policy administration system changes.