The Web Can Transform Underwriting

The Web Can Transform Underwriting

Getting it rightthats probably every underwriters nightmare, especially with the exponential increase in capital into the insurance industry since the terrorism of Sept. 11.

Getting it right. Unquestionably, its every insurance executives dream that underwriters accomplish this goal.

In a fast moving world driven by technology, many insurance company senior executives still find themselves mired in old-school underwriting and, as a consequence, are probably losing a lot of sleep. Their nightmares are filled with visions of non-adherence to underwriting and rating rules and state regulations, inaccurate pricing, duplicate submissions, ceiling high stacks of paper, and re-keying errors.

These same executives have wondered how many policies were written today by the agents in the field. They realize they have to wait several months to find out. Worse yet, they typically must wait up to four months before the funds from each new policy are deposited into the corporate bank account.

For many years, insurers have had great difficulty in solving this problem. Now companies incorporating Web-based technology to improve underwriting results and accelerate the billing cycle are finding that they have the competitive differentiation they are seeking.

Early adopters have the inside track and, more importantly, this is a short race, one never experienced by the industry at any time in its history. The early adopters are sprinting ahead and there wont be enough time for the trailers to catch up. The trailers will be also-rans, so to speak, and facing “early retirement,” because not only will they miss out on the advantages of todays technology, they also will be unable to participate in the next wave of technology enhancement.

Carriers who adopt Web-enabling technology will have the tools in place to quickly react to and manage market changes without compromising quality of business. For the laggards, it will be like trying to load 2002 software on a Windows 95 computer.

Predicted cost savings for a company that incorporates Web-based technology into their legacy systems or establishes a new system altogether are varied. The average cost savings range from 25 percent to 30 percent.

Even though that is significant, Web-based technology generates more than just cost savings. The use of technology impacts the fundamental competitiveness, franchise value, credit quality and ongoing strength of insurers.

Straight-through processing is a key component of improving underwriting. It incorporates functionality that allows agents to rate, quote, bind, and, if they wish, issue policies and endorsements online in real time. The benefits of straight-through processing to carriers include lower expense ratios, improved loss ratios, increased sales, enhanced ease-of-use by agents, improved customer service and accelerated cash collection. These benefits primarily result from eliminating deviations from underwriting rules and pricing guidelines, and reducing manual administrative processing and waste.

Straight-through processing offers a quicker, more integrated and seamless interfaceone-step processingbetween managing general agents, agents and carriers. It gives underwriting control back to the insurance company. It yields accurate and timely access to premium and underwriting data in a uniform format that allows the opportunity to assess risk simply and precisely.

Finally, automating administrative tasks allows professional staff to focus on what they do best. As off-line processes are streamlined through the use of straight-through processing, sales staff, underwriters and risk management professionals can focus on growing a book of business and improving risk quality and profitability.

This process enables the automation of labor-intensive policy origination and maintenance activities, which will reduce administrative costswith significant savings that go straight to the bottom line. The process reduces data input by eliminating re-keying, which is critical.

Usually, a companys point of differentiation can be explained in one sentence. But its all the hidden benefits that are working behind the scenes to create an advantage in the market place. In this case, its what technology can do in real time, 24/7, to improve underwriting, achieve adequate pricing, speed up the billing cycle and improve cash management, such as:

Delivering pricing accuracy.

Enforcing adherence to company underwriting and rating rules, and state filings/regulations.

Increasing company management control, audit and reporting capabilities.

Delivering real-time information for data mining and modeling.

Facilitating pull-through marketing, up-sell and cross-sell.

Creating multi-level underwriting rules.

Ensuring compliance with mandatory endorsement requirements.

Allowing integrated underwriting workflow.

Supporting consistent, accurate underwriting.

Decreasing maintenance costs on product and underwriting guideline changes.

Allowing pinpoint specificity in applying underwriting business rules.

Providing a single point of control for underwriters.

These are only a few of the benefits that can eliminate nightmares and allow senior executives to dramatically reduce costs and increase cash flow.

Insurance executives who are ahead of the curve are no longer questioning the value of technology. Their main question is: “How and when can I use this tool to achieve speed to market while, at the same time, making underwriting more effective and efficient?”

Improving the underwriting process through Web-enabling technology has become a key strategy in most carrier business plans because today the most prevalent worry among executives is survival in the short term.

It wasnt that long agoalmost seems like yesterday, in factthat insurance executives would write business strategies targeted three to five years in the future. Today, the true visionaries recognize the dramatic industry shifts that will impact the next 12-to-18 months.

These executives know they may not be around in five years to implement the long-range strategies if they dont embrace these rapid market changes and recognize the payoff that good technology can deliver.

Geoff Smith is executive vice president and chief operating officer of ePolicy Solutions Inc., an ePolicy company, based in Torrance, Calif. Check www.epolicysolutions.com for more information.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, July 29, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.