A Commercial Underwriter’s Guide to Automation, Part 1

Front to Back Office Automation

Insurance underwriting is a critical differentiator between the leaders and the laggards when one looks at it from an operational performance lens. We’ve drafted this blog for Underwriters who are ready to disrupt, evolve, and drive significant tangible impact across their organization.

Based on our years of experience of partnering with Insurers on their business transformation programs, we’ve seen a consistent thread that emerges out across all of them - underwriting transformation. For the new age Underwriter, cost optimization, portfolio profitability, customer experience, and efficiency stand out as significant success factors. As an industry, Insurance has been relatively slow compare to some of the other sectors when it comes to the adoption of digital transformation. Consequently, the existing systems and processes pose several challenges on their way to achieving these objectives.

Excelling on these four fronts requires them to adopt digital technologies like artificial intelligence, machine learning, natural language processing, optical character recognition, robotic process automation, and several other principles like design thinking and legacy modernization. 

In this and subsequent blogs, I will give you a glimpse into how you can embrace automation to solve for a variety of challenges that the insurance value chain throws up as you try to achieve your four core objectives. We’ll also list down what are the measures of success of your automation-based programs and what are the risks associated with inaction. At last, we provide you a view into how you should build the roadmap to automate and modernize underwriting and how to map that to the underwriting value chain.

Insurance underwriting is a critical differentiator between the leaders and the laggards when one looks at it from an operational performance lens. We’ve drafted this blog for Underwriters who are ready to disrupt, evolve, and drive significant tangible impact across their organization.

Underwriting as the growth springboard 

Leading research by McKinsey reveals that it’s the operating results that have the most significant impact on the overall financial performance of insurance firms.

If we double click on operating results, the loss ratio impacts the operating performance the most. Underwriting, therefore, as a function becomes exceptionally crucial to the success of an Insurer. Our observation of having worked with Insurers tells us that there are four primary objectives that an 

Underwriter consistently achieves to drive market leadership are:

1. REDUCE COSTS
2. IMPROVE UW PROFITABILITY
3. IMPROVE EFFECIENCY
4. SIMPLIFY CUSTOMER JOURNEYS

Obstacles to meeting Underwriter’s full potential

Optimizing underwriting costs

The Underwriters are supposed to drive intelligent decisions while evaluating the risk. This decision making requires them to assess several parameters that they collect during the broker submission. Any missing information or data point in the submission delays the submission cycle and decision making for the underwriter. The inability to quickly get access to this data leads to the piling up of several requests.

And, hence a lot of Underwriter’s precious revenue generation time gets consumed as they solve for incomplete submissions.

Further, if this data and information flow involves multiple systems (like document management system, policy administration, or email workflow), it worsens the problem. To resolve the massive pileup of submissions, the underwriting departments add more workforce who could have otherwise underwritten more submissions.

However, the additional manual effort put in to offset the flow of submissions is never enough and extends the cycle time significantly. This broken process results in high discontent amongst Brokers, and eventually, it hits the Insurer’s new business or renewal rates, and the cost of acquiring new business increases sharply.

Maximizing Underwriting Profitability

With limited data and facts to act on, Underwriters invariably take significantly high-risk decisions, which results in higher claims pay-out than what they expected. In such a scenario, there’s little that the Underwriters can distinguish between submissions coming from good/appointed Brokers and the sub-par ones (who are usually wrong at ensuring coherence between their submissions and line of business sought by them).

Further, the inability to manage the massive volume of submissions results in loss of business, which hurts their profitability.

Part 2 Blog will talk about building superior customer experiences & fixing the underwriting efficiency problem.