When it comes to insurers' attitudes toward underwriting automation, it shouldn't be a matter of “if and when” but rather “what and how,” says Deb Smallwood.
“A full 88 percent of insurers in our research are investing in underwriting projects or initiatives,” says Smallwood, founder of Strategy Meets Action. “There definitely is a high level of interest in the technology. Insurers need to establish clarity around what solutions are available and how they can be best used to achieve their underwriting automation goals.”
Providing that clarity was the objective of a session, titled “Underwriting: Challenges, Creativity and Myths” at the ACORD LOMA Insurance Systems Forum. Smallwood was joined on the panel by Charity McGill, product manager at Accenture, and Justin Manley, CIO at specialty insurer Torus.
“A key theme of the session was that underwriting automation is not just about achieving straight-through processing,” McGill says. “Instead, it is about using technology to assist the underwriter and streamline the underwriting process.”
A Study in Automation
Streamlining the underwriting process was a benefit targeted by Torus. Manley highlighted the company's experience with implementing Accenture's Duck Creek Policy Administration platform. The system, branded internally as “Escape,” supports three different external-facing web portals for the casualty/umbrella, errors and omissions, and healthcare lines of business. Torus also uses the platform internally for straight-through processing of small- to medium-sized commercial accounts in ISO-based lines.
“Deploying an underwriting automation solution allows us to focus our underwriting intelligence on accounts that require high touch, especially in casualty and umbrella lines of business,” Manley says.
“We were finding a lot of our underwriters wanted to go after larger accounts but were buried by their volume of small and medium accounts. A lot of those small accounts were very similar in nature and perfect candidates for automation.”
After starting itsU.S.business just three years ago, Torus has been able to grow to over $1 billion in written premium, an achievement that Manley says couldn't have been reached without increased efficiency.
“Underwriting automation has been a key to managing our growth,” he explains. “We reduced the quote process from 12 minutes to four, and we've increased our quote hit ratio to 87 percent.”
Manley says that if there is one message he would like to instill it is that underwriting automation doesn't equate to underwriter replacement. “We've continued to grow and hire because we've used automation to help expand our business,” he says. “Underwriting automation doesn't have to lead to job elimination.”
Maintaining an Edge
Smallwood believes the high level of investment in underwriting automation indicates that there is a “sense of urgency” around the technology enablement.
“In a competitive landscape, insurers need an edge, and what differentiates an insurance company are product, price, and service,” she explains. “Underwriting automation tools help insurers bring on new risk types and products, allow for consistent and disciplined pricing precision, and allow insurers to become innovative. Automation will also free underwriters to spend more time on more difficult risks, have more time to expand relationships with the agent or broker, and improve overall response and service. It's a win-win for everyone.”
“Automation is about bringing everything to underwriters' fingertips,” says McGill. “One of the most frustrating things I've seen is that as a company moves beyond commodity lines and into high-touch products, underwriters spend an enormous amount of time building an analysis case and putting information into a single underwriting file. They can really benefit from having all that information brought to them.”
“The definition of automated underwriting includes improving the efficiency in underwriting process and supporting the effectiveness in underwriting decisions with the use of software, tools, data, and analytics,” Smallwood explains. “The level of automation applied varies depending on type/size of risk, line of business, and underwriting strategy. The role of the underwriter may change; it depends on level of automation and the type of automation.”
Growing Role for Technology
Interest in automation will continue to grow. Carriers first began deploying solutions in personal auto and expanded to homeowners. Today, automation of business owners, small commercial, and workers' compensation is more commonplace, and carriers are finding ways to move automation into middle market and larger commercial lines.
The lesson for insurers is that this type of technology investment will become table stakes. Without it, the pricing precision, efficiency, cost saving and effectiveness will not be there,” Smallwood says. “Companies without underwriting automation will ultimately lose their competitive advantage, exactly what we witnessed in the personal automobile
space.”
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