Faster, better, cheaper.

That was the approach to development pioneered by former NASA director Daniel Saul Goldin in 1992, and it became a mantra of organizations across many industries. Over the past 20 years, that approach has seen both success and failure. Its failures have led to controversy, and even some ridicule. (“Faster, better, cheaper: pick any two.”)

Yet despite the challenges of successfully achieving this trifecta of performance, insurers are targeting faster, better, and cheaper in their drive for underwriting efficiency.

“In their underwriting initiatives, insurers are focused on driving speed to market, making it easy to do business with them, and reducing overhead and cost,” says Deb Smallwood, founder, Strategy Meets Action (SMA).

According to SMA research, 88 percent of insurers are investing in some type of underwriting transformation initiative. In its benchmarking studies, Ward Group found that near half of companies reported that they were likely to replace their entire underwriting system.


Although the details of the underwriting process vary significantly between personal and commercial lines, both lines of business share common efficiency objectives.

“Reducing the time from receipt of application to booking of premium is still a big goal for both personal and commercial lines,” says Frank Petersmark, CIO advocate with architecture consultancy X by 2. “Also, both verticals are focused on reducing the cost of underwriting. That’s a nice way of saying, ‘if we have fewer people touching an application, it will help us reduce costs.’”

“Carriers are focused on making it easier for producers to submit business, expand the broker channel, and to accept business from multiple channels as part of the same underwriting process,” Smallwood says.

But achieving those objectives involves different journeys within different sectors. “In personal lines it’s all about low-touch, no-touch STP (straight-through processing),” Smallwood says. “On the commercial side, companies are doing it [STP] for small risks, but when you get into larger more complex risks, [efficiency] becomes about streamlining the process, reducing handoffs, and using automation to guide the decision-making process and create a platform for collaboration.”

According to Ward Group, high performers in personal lines had STP rates nine points higher in auto and seven points higher in homeowners, as well as an underwriting expense ratio nine points lower than at average companies. Top performing companies also update their technology more frequently.

“Even though high performing companies had newer policy admin systems than others, they were more likely to be considering replacement than other companies,” says Jeff Rieder, partner, Ward Group.

A policy admin replacement project is at the heart of improved underwriting efficiency at The Dominion of Canada, which writes personal and commercial P&C. Under the company’s previous policy admin system, every new business submission had to go to an underwriter review desk.

“We had a lot of manual work where paper was flowing between agents and ourselves. Paper was really serving as the front end for the underwriting process,” says Steve Whitelaw, senior vice president, business solutions, The Dominion.

“Once the paper was input, there was workflow automation, but the workflows were determined by the system and were not easily configurable,” he adds. “Where there were processes that couldn’t be handled by automation, such as exception-based referrals, we needed to handle them completely outside the workflow, which introduced risk in the process and the requirement to have controls around that process.”

The Dominion’s replacement project involves consolidating three different systems—two for personal lines and one for commercial—to OneShield’s Dragon platform. Multiple application systems used by brokers will also be consolidated into a single front end for electronic policy submission.

“We wanted a solution that would meet the needs for both our brokers as well as our internal staff,” says Derek Oke, senior information technology architect, The Dominion.

The insurer began the project with its Chieftan line of auto business, a simplified product sold exclusively in Ontario. The Dominion targeted and achieved a 50 percent pass-through rate at implementation, but plans to dial up that percentage.

“We can set different authority levels by brokers. Some brokers pass through higher percentages than others. We’ll increase those percentages as brokers get more familiar with the system and we can assess the experience of their business,” Oke says.


Although STP is a primary efficiency goal in personal lines, it’s not the only objective. “STP is just one level of automation,” Smallwood says. “Carriers are realizing more and more how to use automation to make it easier for underwriters to assess risk, facilitate information gathering, and make the decision process more accurate and consistent.”

On business that Dominion underwriters still need to manually assess, the Dragon project has helped the company reduce turn-time by 80 percent, primarily because the new platform handles changes in real-time rather than overnight batch. Previously, each change could only be handled individually and in sequence, meaning that the number of days a request would take to process was directly tied to the number of changes being implemented.

“Today, the majority of time delays on applications that require underwriting review are due to waiting on information from the broker,” Oke says. “The new system reduced the communication and follow-up time significantly.”

Whitelaw credits increased efficiency and ease of use for brokers with a “significant” increase in new business. Also, moving from a combination of multiple front-ends and paper-based submission processes to a single, web-based system has made life easier on the underwriting department.

“We have all our business in one system, not a distributed system, and we consolidated data on the back end. We can prioritize tasks, and the new interface lets underwriters enter the system and see what is waiting for them to do,” Whitelaw says.

The insurer has also gained new management insight into the underwriting process. “Before, it was hard to even measure productivity among our staff. Now we know when apps are submitted, where they are, and how long they’ve been there. We can get much better metrics on changes that are taking a while, how fast we are getting back to our brokers, and other statistics that had been manually compiled before,” says Oke.

The Dominion also targeted control and compliance objectives. For instance, the insurer must comply with a Canadian requirement to issue a policy document within 14 days of request and report that information to the Ministry of Transportation, which maintains a database for the country’s mandatory insurance requirements.

Under the previous manual process, backlogs in paper processing could cause that date to be missed. Now, incoming requests are time stamped and prioritized, and automated controls and metrics have been established around policy document production tasks. Adding and automating these controls has helped The Dominion stay compliant and manage reputational risk.

“If a driver gets pulled over for a violation, the officer checks the insurance database. If the record isn’t updated, the driver isn’t allowed to drive. If that happened because a request wasn’t handled promptly on our end, our reputation suffers,” Whitelaw says.

The next steps in the project are to roll the Dragon system to the rest of The Dominion’s personal auto business, which represents 46 percent of the company’s premium volume. By early 2013, the insurer plans to have the system rolled into commercial lines, starting with its program managed business.


Straight-through efficiency has been a more elusive goal in commercial lines. “For smaller commercial policies and business-owner policies, it [STP] is getting there. Never say never, but I think we’ll be hard pressed in the near future [to reach the point] when mid-size or large accounts will be underwritten straight though, no touch,” says Petersmark.

“In commercial lines you move quickly to a more complex product,” Whitelaw says. “There are some efficiencies in personal lines that we just won’t be able to get on the commercial side because it doesn’t lend itself to automated workflows. But with that said, the rules engines within the Dragon system will allow us to manage the normal flow versus the exception flow more tightly as we look for the opportunities to automate more.”

Technology initiatives to improve underwriting efficiency in commercial lines are focusing heavily on consolidating information, facilitating collaboration, and providing decision and pricing support.

“Rather than having an underwriter go out to different websites and pull in information, underwriting automation does that automatically, presents it to the underwriter, and helps the entire process be more accurate and consistent,” Smallwood says. “Commercial carriers are also looking outside the policy admin system itself to leverage various underwriting tools.”

In its move to improve underwriting efficiency, Preferred Concepts focused first on excess liability in its umbrella line. “In small umbrella, it’s all about speed to market and efficiency,” says Christopher Treanor, president, Preferred Concepts. “You can’t spend a lot of time underwriting a $5 million umbrella.”

Two years ago, the insurer looked to upgrade its underwriting platform that Treanor describes as “antiquated and creaky.” Difficult for underwriters to use and lacking a web interface for retail agents, the system did not handle exception processing well, resulting in applications being rejected by the system only after the agent had first spent time entering all the application information.

As an MGA, Preferred Concepts sought an underwriting platform that would address these limitations while also enabling better and faster collaboration among its own staff, its carriers, and retail agents in the underwriting process.

“We wanted to take advantage of a more contemporary technology—to use screen sharing to see what our customers [retail agents] were doing on their screens, and to use things like live chat to have an interactive conversation with both our customers and carriers,” Treanor explains.

Preferred Concepts chose to replace its legacy system for umbrella with the FirstBest UMS underwriting system. “A key feature of UMS was the ability to create a dynamic conversation loop between the retail agent and insurer, where we can communicate to each when need be, in real time, and in a way that shortens our cycle time and allows us to make decisions more quickly,” Treanor says.

The system has also provided a front end that consolidates information essential to the underwriting process—loss data, exposure data, and external information. “You could get that data before, but you had to go to five different places to get it. We wanted to be able to give our underwriters information at their fingertips and in a single place,” says Treanor.

In addition to targeting its efficiency goals, Preferred Concepts has improved the underwriter-agent relationship. “For agents, the UMS system is more transparent,” says Georgi Munger, vice president.

After agents enter application information, they can see which underwriter the account is assigned to, follow up on any requests for information, upload documents such as loss runs received from other insurers, and access additional information that is added to the underwriting file.

“It’s a more organized and efficient way for both underwriters and agents to look at their accounts, collaborate, and manage books of business,” Munger says. Collaboration, information-sharing, and rules-based decision support also lead to consistency in the underwriting process, which Ward Group’s Rieder believes is a goal that rivals efficiency in importance among commercial insurers.

“In commercial lines, there is a strong focus on consistency in both risk selection and pricing. Carriers and agents alike want to be sure that two underwriters looking at the same risk come up with the same price,” he explains.

Preferred Concepts has also achieved efficiency gains in areas beyond the direct underwriting of accounts. For instance, because Preferred underwrites on behalf of carriers, those carriers regularly audit Preferred’s underwriting files.

“In the old days, we would have to physically pull files for the audit. Our carriers would come on site, and they would sit and audit those files,” Treanor says. “Now, the entire process can be handled online because they have access to all the same information we have. They can look at business whenever they need to and watch us in real time.”


Some significant gains insurers have made in underwriting efficiency have come from the development and maturation of external data sources used for underwriting analysis, predictive analytics and modeling, and the integration of these sources with carriers’ policy systems for prefill to trim manual data entry.

“Ten years ago when we started to do STP for auto, the sources weren’t as robust or refined. Now all the MVRs, data fields, accident reports, and so on are readily available,” says Smallwood.

The biggest remaining impediments to making efficiency gains come from the systems within carriers’ own data centers.

“Some carriers still have this mess in the basement,” Petersmark says. “The underwriting technology is out there, but it’s often the case that over time, carriers have created many layers of complexity in their environment. As a result, there’s not a smooth way of getting actionable information to the underwriting front end to support automation or so that underwriters can use it. Some data is in the legacy systems, some is in middleware, and some is generated from different front ends that agents use to submit information.”

Ward Group found that, on average, insurers need 2.5 systems to get a complete view of the customer and have 1.5 policy admin systems that are 10.9 years old.

Cleaning up the mess starts with the business process of identifying the kind of information that is important to underwriters and facilitates their selection and rating of a particular risk. Then, the task becomes staging, promoting, or otherwise making that information readily accessible.

“That’s easy to say, but hard for a lot of carriers to do because of the architectural challenges they face,” Petersmark says.

Carriers must also contend with significant cultural challenges to underwriting efficiency initiatives.

“Underwriting has been happening at companies for a long time and in a certain way. When you have experienced underwriters who are good at doing what they do, messing with that process can incur their wrath,” Petersmark says. “There is definitely a delicate balance—how do you accommodate those folks, or should you accommodate those folks?”

“Change management must include involving the underwriting department to understand that by becoming more efficient, eliminating redundant tasks, and automating manual back-and-forth processes, it will increase their effectiveness and allow underwriters to focus on more complex risk,” says Smallwood.

The Dominion addressed cultural change through initial and ongoing communication and collaboration.

“From day one, we’ve been telling people this isn’t an exercise to lay off people, this was a way to make them more efficient,” Whitelaw says. “Also, by starting with a small line like Chieftain, underwriters can see how automation will impact other lines we move into. They can see how they will be able to spend more time marketing to brokers, training brokers on our product, and building their book of business.”


Technology is at the heart of underwriting efficiency, but Rieder stresses that carriers must resist the effort to pave the cow path.

“A common problem we see is that when companies have redundant processes, they put technology on top of those processes rather than looking at what steps can be skipped,” he says.

Automation at The Dominion went hand-in-hand with a process reengineering effort. In one example, The Dominion found that the staff was re-entering information into the claims system that was already available in the policy system. The company created a new integration between the two systems to automatically create a policy record.

“We recognized there was redundant and nonproductive work people were doing. It was our intent to eliminate that work and repurpose those people,” Oke says.

“Our entire intake process itself was reengineered due to the elimination of paper in the process,” he adds. “Because new business now comes through electronically from the broker, it’s a whole different workflow. We expect that by the time the system is fully deployed, we could repurpose up to eight full-time employees due to that efficiency alone.”


Efficiency will continue to be top of mind for carriers in both personal and commercial lines, driven by the need to bolster the bottom line and grow the top line.

“Insurers can become very creative in terms of product and pricing when they have automation tools that can help bring on new risks with pricing precision. That’s important because the insurance product itself is really a commodity. What differentiates an insurance company is the combination of product, price, and service,” says Smallwood.

“Automation has already become table stakes in personal lines,” she adds. “In commercial lines, if you don’t have a platform in place to support efficiency in risk assessment and pricing, you better start looking or you will soon be at a disadvantage.”