Idea In Brief
According to a recent survey and report by Novarica, 85% of life insurers now have paperless underwriting processes, 77% of them use automated data requests (to third party databases) for underwriting requirements, and 77% rely in part upon automated underwriting for decision-making.1 However, the statistics do not account for those organizations that have not yet started using automated underwriting, or those that have started dabbling in automated underwriting but have not yet realized its full potential.
The motivations that drive insurers toward automation vary greatly. Some companies are looking for expense reduction. Others want to improve efficiency. Still others are looking to improve their client service through a better overall customer experience. In this paper, Paul Okeefe outlines the key factors that insurers should consider, and the questions they must answer, when making automated underwriting a part of their strategic plan.
The last decade has revolutionized life underwriting. The industry has had to adapt to a host of global challenges, including a series of economic downturns, new regulations in nearly every quarter of the globe, keeping up with consumer demand and expectations, and the expense of opening new channels and pursuing new technologies. When big data interest, policy administration system overhauls and IT resource shortages are added to the list of insurance company concerns, it seems like automated underwriting would have a difficult time making headway as a business priority.
However, in the last three years, e-underwriting, or automated underwriting (for our purposes, used interchangeably), has experienced a surge of interest, partially due to the maturation of technologies that make it more attractive to companies that want to make e-underwriting a strategic initiative. It now fits well into organizational plans. This rise in interest can also be attributed to the reinsurers and technology providers that have developed a financial model for implementation that gives e-underwriting a small IT footprint and a low price point.
Before getting involved in any underwriting automation plan, it is constructive to review
e-underwriting considerations and ask some important questions that focus on an
organization’s unique set of circumstances. The key questions that should be asked and answered regarding a company’s need and general readiness for e-underwriting include:
- Will it support our business?
- Is it a viable option at this point in time?
- What are our pressing needs (e.g., resource relief, sustainable growth)?
- If growth is a consideration, in which markets do we wish to grow?
- What happens if we do not move toward automation?
- What kind of process or system makes sense?
- How would it fit into our overall future plans?
- Do we have the right resources to support this effort?
- How do we get started?
Organizations should also weigh what general benefits they are seeking from automated underwriting. These include:
- Increased sales
- Better use of traditional underwriting resources
- Significant returns on investment
- Marketing support
- Business strategy support
- Improved risk management
- Increased decision consistency