Un­der­writ­ing’s Changing Land­scape Un­der­writ­ing’s Changing Land­scape

Digital Insurance - - STRATEGIES -

The pre­vail­ing winds of tech­nol­ogy change that will af­fect in­sur­ers’ pol­icy ad­min­is­tra­tion sys­tems are also set­ting in mo­tion sub­stan­tive changes in the un­der­writ­ing func­tion across all lines of busi­ness. Thanks to mo­bile tech­nolo­gies and the In­ter­net of Things, much of this change has to do with data—lots of data—now flow­ing into a car­rier’s stores. Car­ri­ers are un­der tremen­dous pres­sure to prop­erly cleanse and an­a­lyze both struc­tured and un­struc­tured data in or­der to cre­ate more ef­fi­cient pro­cess­ing for ac­tu­ar­ies and un­der­writ­ers, and in real time.

The plat­form re­quired for real-time un­der­writ­ing—one that al­lows for data ag­gre­ga­tion--is no longer a thing of the past: Full de­ploy­ment of real-time un­der­writ­ing is a log­i­cal next step in the wave of au­to­mated un­der­writ­ing and in­te­gra­tion with the In­ter­net of Things, notes re­search and con­sult­ing firm Ce­lent in its re­port, “What’s Next in P&C Pol­icy Ad­min­is­tra­tion.” Stat­ing that the uses are in­fi­nite, Ce­lent says vol­umes of avail­able data will be gen­er­ated from ev­ery­thing from large com­mer­cial equip­ment with ad­di­tional real-time sen­sors to driver­less cars.

“We’ll see big data, struc­tured and un­struc­tured, in real-time, which will be trans­formed into un­der­writ­ing busi­ness pro­cesses in the form of scores,” notes Light. “The un­der­writer does not want to watch 8 hours of park­ing lot tape; he/she wants

to see the score. This will cre­ate a great op­por­tu­nity for third-party com­pa­nies in a po­si­tion to pro­vide this type of data an­a­lyt­ics ser­vice.” Un­der­writ­ing life and health busi­ness is a dif­fer­ent story, notes Tom Scales, re­search di­rec­tor at Ce­lent. Not­ing that the nature of life and health in­sur­ance un­der­writ­ing re­quires ob­tain­ing much more in­for­ma­tion from the pol­i­cy­holder than does

P&C, “real­is­ti­cally on life side it comes down to cy­cle time,” he says. “For ex­am­ple, in our com­pet­i­tive life mar­ket, right now the cy­cle time is the 37 to 38 days. The in­surer does not want the pol­i­cy­holder to change their minds dur­ing this time, so im­proved cy­cle time be­cause the dif­fer­en­tia­tor.” There are sev­eral ways to cre­ate ef­fi­cien­cies in the un­der­writ­ing process, chief among them Straight-Through

Pro­cess­ing (STP), which en­ables an en­tire trans­ac­tion process to be au­to­mated--con­ducted elec­tron­i­cally with­out the need for in­put or man­ual in­ter­ven­tion. STP is now a high pri­or­ity for in­sur­ers in North Amer­ica, EMEA and Asia, says Light (see Fig­ure 1).

With more than 70% of the largest car­ri­ers now re­al­iz­ing the ben­e­fits of this type of au­toma­tion, STP prom­ises more than ef­fi­cien­cies; it’s ac­tu­ally changing the un­der­writ­ing func­tion. For ex­am­ple, the U.S. Bureau of La­bor sta­tis­tics es­ti­mates that em­ploy­ment in un­der­writ­ing across fi­nan­cial ser­vices will shrink 12% be­tween 2014 and 2024.

“There are fewer un­der­writ­ers now, or more spe­cial­ized in the field

(with pro­duc­ers and agents), or they be­come port­fo­lio man­agers,” notes Light, ex­plain­ing that they think more

about their book of busi­ness rather than in­di­vid­ual trans­ac­tions, and are held ac­count­able for busi­ness per­for­mance. “They are be­ing eval­u­ated on the ag­gre­gate for all busi­ness on the books, rather than how many un­der­writ­ing de­ci­sions were made in a day,” Light adds. For life and health, the un­der­writ­ing func­tion is more static. “We are see­ing in­vest­ment in new busi­ness, but funded in a way that un­der­writ­ing has not re­ally changed,” notes Scales. “Even com­pa­nies at the fore­front us­ing di­rect-to-con­sumer apps are still ask­ing hun­dreds of ques­tions be­fore the app is pro­cessed.

We are hop­ing a car­rier will break that mold and cre­ate a 5-page life in­sur­ance app.”

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