ACORD LOMA 2013: The Rules of Underwriting

Anyone who challenges authority lives by the phrase, “Rules are made to be broken.” But what if the rules themselves are broken? Business rules, that is.

I spent some time on Monday speaking with people about underwriting and the problems insurers face in correctly performing this important function. That led to another discussion of business rules.

I spend a lot of time speaking with software vendors and one of the points they invariably bring up about their systems is how easy it is for their customers to infuse the systems with business rules. The problem some carriers have, though, is they have rules for writing rules about their rules. In other words, rules run amok.

I spoke with Tomer Srulevich of Sapiens and he explained that a banking customer his company worked with had over 20,000 rules in their old underwriting system. He doesn't believe such insanity is found solely in the banking arena, either. Some municipalities don't have that many rules. (I believe here inLas Vegasthey have only a couple dozen rules.)

Donald Light of Celent, who just wrote his annual CIO Pressures and Priorities treatise, discovered that nearly 40 percent of the CIOs interviewed for the report plan to wrap and extend their underwriting systems during the coming year.

“This is likely driven by a need for greater flexibility and automation, and is enabled by the increasing use of rules and workflow/BPM systems,” wrote Light.

One point that has to be pounded into the heads of many companies looking to improve their underwriting is that a new system is not a panacea. It's like having a goal of losing 10 pounds. Wishing and hoping don't work.

Insurers need to combine new practices and processes if the software is going to reach its potential. With the cost of any underwriting system—new or simply improved—it means more than just writing a check.