Automated Underwriting — A glimpse of the future

Cloud computing in insurance

Many insurers consider the cloud to be a good option for processing and storage of insurance data. For example, insurers can leverage the use of cloud computing to store customer records including policy details and claims history. This will enable all agents to have access to similar information and hence reduce the time and effort of obtaining the same information from a customer when the customer is transferred from one agent to another agent.

Blockchain in insurance

· The global market for blockchain in insurance is expected to grow from $64.5 million in 2018 to $1.39 billion by 2023 — a compound annual growth rate of 84.9 percent.

· In the Accenture Technology Vision 2019 survey, more than 80 percent of insurance executives reported that their organizations have adopted distributed ledger technology across one or more business units, or are piloting or planning to pilot the technology.

· The analysis of two use cases identified between $99 million and $277 million in annual savings for personal auto insurance carriers in the US alone by the third year of use.

· Providing a single source of truth allows friction in business processes to be drastically reduced, using solutions such as smart contracts to facilitate and automate DLT networks.

Strategic imperatives

Incorporating e-Underwriting in Growth Strategies Automated underwriting does not accomplish market growth on its own. Its value is limited to how well it is incorporated into comprehensive strategies for creating new products and reaching new markets. While it can be effective in improving the sales processes for existing products, it is most effective when it is tied to a completely new product. An insurer’s strategy will determine how automated underwriting can be used to its best competitive advantage, such as translating underwriting cost savings into lower premiums. Many organizations are learning that automated underwriting can be a new market perpetuator. One of e-underwriting’s best features is its ability to track decisions, evidence data and outcomes. The management information (MI) that can be gleaned from ongoing data analysis can yield a wealth of pre-sales knowledge. This knowledge can be used to increase automation, improve decisions, change pricing, launch new products and more. The data can also be used to build propensity-to-buy or propensity-to-claim models to target future growth and limit future risk.

Better Use of Underwriting Resources Optimizing processes and using existing technologies to reduce resource burdens are always smart practices. Implementing e-underwriting may require cultural and process shifts, but these shifts can reap rewards in flexibility and process optimization. An organization wishing to launch a high-volume product without increasing its underwriting staff will find e-underwriting is a necessity because it is a resource saver. It is important to note here that e-underwriting is nearly always viewed as a supplemental resource, not a replacement. Organizations most commonly position e-underwriting in the following ways:

· Automated underwriting is not designed to replace underwriters. Rather, it seeks to gain efficiencies by allowing straight-through processing for those cases that do not require underwriting intervention.

· Even in cases where underwriters still need to touch an application, automated underwriting can alert underwriters to risk factors, making case review more efficient.

· Underwriting rules contain an organization’s underwriting philosophy and ensure that they are applied consistently across multiple product lines, distribution lines and locations.

Business value and impact summary

E-underwriting also pays back insurers through distribution channel shifts. An application that comes through a Web portal costs less to underwrite than one that requires a tele-interview, which costs less than a full in-person medical review with an exam. Automated underwriting can help an insurer save money through direct channels and by automating processes for other channels. It is important to acknowledge, moreover, that e-underwriting’s payback is especially significant when viewing the long-term benefits. Its greatest underappreciated asset is that it has the potential to reduce risk and lower long-term financial burdens. Automated underwriting, when implemented properly, brings consistency to the underwriting process. Organizations considering e-underwriting should invite their finance, marketing, actuarial and underwriting departments to participate in a forecasting exercise to predict the payback potential, taking all efficiencies and conservative sales goals into account. Building this business case not only allows e-underwriting champions to articulate its possibilities, it also gives everyone a preview — a clearer vision of a transformed process

Futureproofing There is a reason for organizations to get involved in e-underwriting now. What is coming of underwriting is so revolutionary that it will force many insurers into adoption and possibly transform their marketing and business strategies in ways they never imagined. If a complete automated underwriting conversion is in the works, one that looks much more like the world of pre-underwritten credit card offers, then insurers should be doing all they can to bring agility into their organizational toolkit. To capitalize on boom opportunities for growth, the industry will need to reinvent the process and have automated decision-making capabilities at its core. The upside should be a near-constant ability to lower risk that will help to offset the inability to count on the revenue generated by investments. In other words, the future holds the possibility of real, substantial numbers of good applicants contributing to top-line growth.

In an environment where machines and underwriters can work together, it is important to acknowledge that underwriting is both a science and an art.

Big Data’s implications for underwriting

A key priority for life and health insurers is to identify genuine opportunities for Big Data in underwriting to ensure efforts are focused on realistic ventures. Given the pace at which data science is advancing, it is essential for insurers to make sure the path taken aligns with the company’s overall strategy and plan. Also, as with any fast-developing technology, it is important to balance benefits against potential harms.

Need for digital technology in Insurance Industry

As digital technology continues to become more nuanced and precise, the number of insurtechs is likely to grow. Insurers that do well in the new digital landscape will be those that adopt the creative solutions being developed by some of these innovative companies. As shown in the short list above, there are plenty of contenders developing creative digital offerings and helping drive the future forward.