Watching Over Underwriting

With more than half the year now gone, industry evaluations have been surfacing, and underwriting is a focal point. For example, according to a Swiss Re sigma study released in June, worldwide premiums for life and nonlife insurance grew by an inflation-adjusted two percent to $2.941 billion in 2003. The study shows premiums and results in nonlife business increased markedly last year. Life insurers reported improved profitability despite a slight decline in premium income. Rate increases together with more stringent underwriting standards and comparatively few extreme losses resulted in a marked improvement in nonlife underwriting results in 2003, a Swiss Re statement said.

On the property/casualty side, during Swiss Res 2004 Midyear Economic and Insurance Industry Review conference call (as reported in the National Underwriter Online News Service), senior economist Thomas Holzheu predicted several forces in the marketplace will drive insurers to maintain their underwriting discipline for the foreseeable future, despite the current moderating price environment. Property rates have been moderating but remain profitable, he said. Casualty rates are still strong and continuing to climb in certain lines.

The industry overall will be seeing profits from underwriting in the future, Holzheu forecast, and this is due to a couple of fundamental changes in the industry. One change he pointed to is a more systematic observation of the markets, with more accessible pricing information and now-standard models that didnt exist five or more years ago.

So, where does this leave us? To sum up, we may be happy, but were not carefreeand thus the focus on underwriting (for more on underwriting, see the features on pages 14 and 18).
With the industry targeting growth, underwriting has become strategic, re-marked Gartner analyst Kimberly Harris at a recent industry conference. Sales and underwriting will move closer together to support faster, more effective underwriting, which then makes the [producer] happy and gets the information to the customer so they can close that sale, she said.

Among new underwriting strategies, she indicated carriers are beginning to discuss initiatives related to an electronic work force, transferring underwriting to the point of sale, moving underwriting to Internet-based channels, and thinking about straight-through processing vis–vis the whole underwriting cycle.

To accomplish this, she added, companies are looking at new technologies: imaging and workflow, Web-enabled workstations, business rules and decisioning technology, and underwriting ASP services.

Which of these technologies are now prime time? Mature technologies today (2004-2005), she noted, include business process management-based and businessrule, exception-based technologies that will allow you to improve your underwriting process.

Obviously, all such strategies cant be implemented at once. Given the current environment, the key is keeping in sight that final destinationachieving effective underwriting to maximize profitabilityand then taking it one step at a time.

Sharon S. Schwartzman
Editor-in-Chief