Automation Advantage.Insurers who aren't afraid of change can benefit customers, agents, reinsurers and themselves by automating the underwriting Underwriting
1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt).
2. The process of issuing insurance policies. process.
Robert F. Kennedy said, "Progress is a nice word. But change is its motivator, and change has its enemies." In the insurance world, the enemy to change often comes from within. The most resisted change in the automation of insurance processes is the automation of underwriting decisions. Many underwriters still believe that underwriting is more art than science. Some companies, however, have recognized the many advantages to automating processes, including underwriting. These advantages affect both the loss and expense sides of the equation.
Automated underwriting is essential to enable a free-flowing process from customer to risk taker tak·er
One that takes or takes up something, such as a wager or purchase: There were no takers on the bets.
Noun in the insurance transaction. Currently, personal and commercial lines are being transacted on a limited basis on the Internet. To select and price the risks, companies have created underwriting templates to allow customers to qualify for coverage based on their answers. The advantages to the automation of underwriting processes are numerous.
For example, leverage of underwriting knowledge has been limited in the past to the ability of the master underwriter underwriter n. a company or person which/who underwrites an insurance policy, issue of corporate securities, business, or project. (See: underwrite)
UNDERWRITER, insurances. One who signs a policy of insurance, by which he becomes an insurer. to train and audit the more junior underwriters. The process has been fraught fraught
1. Filled with a specified element or elements; charged: an incident fraught with danger; an evening fraught with high drama.
2. with error and miscommunication mis·com·mu·ni·ca·tion
1. Lack of clear or adequate communication.
2. An unclear or inadequate communication. since the first fire policy was written. Automated underwriting takes away the potential for "weak links."
Automation of underwriting logic allows risk takers Risk Takers is a Canadian television documentary series, which profiles people in dangerous professions.
The show originally aired on Discovery Channel Canada, and also airs on the North American channel Discovery HD Theater. to consistently apply the selection and pricing rules to the segment of the market that they wish to attract. And it allows the underwriter to reach a larger population of risks.
Automation also allows the underwriter to monitor the results more accurately and more quickly and to adjust the underwriting selection and pricing logic immediately. This is in contrast to a traditional underwriting operation, where a change in underwriting selection or pricing strategy must be clearly identified and delineated de·lin·e·ate
tr.v. de·lin·e·at·ed, de·lin·e·at·ing, de·lin·e·ates
1. To draw or trace the outline of; sketch out.
2. To represent pictorially; depict.
3. and then communicated to the underwriting force. Pricing models may require changing as well. Opportunities to avoid a deteriorating de·te·ri·o·rate
v. de·te·ri·o·rat·ed, de·te·ri·o·rat·ing, de·te·ri·o·rates
To diminish or impair in quality, character, or value: market or to take advantage of a good emerging one can be missed.
Refining refining, any of various processes for separating impurities from crude or semifinished materials. It includes the finer processes of metallurgy, the fractional distillation of petroleum into its commercial products, and the purifying of cane, beet, and maple sugar the Model
As experience comes in, it can be used to refine the template (1) A pre-designed document or data file formatted for common purposes such as a fax, invoice or business letter. If the document contains an automated process, such as a word processing macro or spreadsheet formula, then the programming is already written and embedded in the . It is easy to review the important elements, such as the average credit, the mix of business written and ratio of written accounts to quotes by classification, hazard group, state and agency. Management can determine whether the mix is skewed skewed
curve of a usually unimodal distribution with one tail drawn out more than the other and the median will lie above or below the mean.
skewed Epidemiology adjective Referring to an asymmetrical distribution of a population or of data and decide what changes to make in the template to address any perceived problem. It also is important to adapt to changes in the market and profitability by state.
The ability to adapt quickly to change is an important advantage to the automated underwriting approach.
Another benefit of automated underwriting is that third-party data, such as credit and experience ratings can be included in the logic process, eliminating manual processes and reducing costs. New and potential underwriting criteria based on third-party data can be tested, and the underwriting selection and pricing logic can be continually refined. Finally, automation of the underwriting logic allows a process to be presented to the customer directly eliminating double entry and generating better data quality that can be used to further refine the underwriting logic.
The advantages of using an online underwriting model are not limited to improving underwriting efficiency and predicting results. It can facilitate the automation and make the flow of information from consumer to agent to insurer to reinsurer re·in·sure
tr.v. re·in·sured, re·in·sur·ing, re·in·sures
To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company. more efficient. Within the insurance operation, having the rating process automated can eliminate the need for other systems and can allow for efficient interface of policy information with claim information, especially if a third-party administrator handles claims. These advantages can simplify bureau and regulatory reporting requirements and allow for ease of access by policyholders, agents and third-party administrators to individual employer experience and coverage information.
Automated underwriting also benefits reinsurers, distributors and customers. By defining the logic, the risk taker allows the distributor to more efficiently distribute the product, the customer sees reduced costs, and the reinsurer is provided a more predictable model.
An automated underwriting approach creates compelling advantages for the reinsurer and, hence, the insurer. Since the underwriting criteria and pricing variables are extremely objective, reinsurers know what they are reinsuring. If the template or its creator has a track record of experience, that track record can be expected to repeat itself subject to adjustment for market and cost changes. When a reinsurer is underwriting the automated underwriting business, it is underwriting--in essence--one underwriter, and it can very carefully review the rules and understand within a narrow range what results the book will generate. When a reinsurer underwrites a nonautomated underwriting business, it is underwriting, at least to some extent, the subjective decisions of many underwriters, albeit within a framework set by management.
Agents benefit from automated underwriting because they understand clearly the underwriter's appetite for risk. This is more efficient and saves the agents time. Also, the agents do not have to concern themselves with the possibility of having to go back to the underwriter a second or third time with more information. Automated underwriting is a one-shot deal. The rules about what information agents must provide are clear and objective and laid out up front. Finally, agents can have their workload reduced and their role simplified by the automation of the underwriting process.
Customers are the ultimate beneficiaries of an automated underwriting approach. The operating efficiencies and increased predictability of loss and expense results that are gained by implementing an automated underwriting approach will be reflected in lower prices for the customer. Customers also benefit from the immediate turnaround time (1) In batch processing, the time it takes to receive finished reports after submission of documents or files for processing. In an online environment, turnaround time is the same as response time. for obtaining a quote and binding coverage.
1. A fixed, intense dislike; repugnance, as of crowds.
2. A feeling of extreme repugnance accompanied by avoidance or rejection. to Change
Traditional risk takers often are nervous about implementing automated underwriting strategies for a number of other reasons. As may be expected, it is hard for management to believe that every underwriting parameter can be coded. They may feel that they are losing valuable experience and judgment by eliminating underwriters. Many risk takers believe the distributors, or agents, may feel threatened by the automation of the underwriting process and the presentation of applications to the customer.
Management also may be threatened by automation of processes as they see the downsizing (1) Converting mainframe and mini-based systems to client/server LANs.
(2) To reduce equipment and associated costs by switching to a less-expensive system.
(jargon) downsizing that becomes logical as a result of the improved efficiencies. The potential downsizing can be viewed as both a challenge to implement and a loss of power and sphere of control within the corporation.
Furthermore, the implementation of an automated underwriting business within a corporation with other businesses in the same market segments creates potential challenges that need to be considered and managed by senior management. Different expense structures and reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. deals--as well as different underwriting criteria and value associated with the underwriting criteria--can create legitimate differences in pricing levels. It is important to create an understanding between senior management and actuaries that these legitimate differences can exist, and that it benefits the corporation to take advantage of them.
One concern within the corporation in this case can be the impact of the growth of an automated underwriting business on sales within traditional profit centers. The ability to balance the viability and growth of the automated operation and the existing ones is a major challenge in this situation.
Of course, using automated underwriting independently for a start-up insurance entity or within an existing noninsurance entity--such as a bank-- avoids these issues and conflicts. There are many ways in which automated underwriting can and will come into play in the broader financial-services context. It is very feasible to automate the underwriting process for commercial insurance and business loans, for example, simultaneously. Also, an underwriting template has great potential for improving the efficiency and underwriting results for the growing professional employment organization market. Or, it may enable agencies to skip the intermediate insurance company and obtain insurance or reinsurance directly from reinsurers.
The creation of automated underwriting rules for cross products like group health and workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. insurance also has the potential to greatly improve the efficiency of the distribution of financial services The examples and perspective in this article or section may not represent a worldwide view of the subject.
Please [ improve this article] or discuss the issue on the talk page. by or through banks, professional employment organizations, insurers and reinsurers alike. Automated underwriting also has great potential for use with affinity groups A special interest group. This is a marketing term for a group of people with similar interests. through portals or otherwise. Automated underwriting has the potential to allow the efficient development of cross products by both traditional and nontraditional underwriters in commercial lines insurance.
Quoting and Binding
For personal lines, there are many Web sites where consumers can go to obtain quotes for automobile insurance and homeowners insurance. Geico Direct, Nationwide and State Farm are companies that offer this service. There also are Web sites like InsWeb and InsureOne, where consumers can compare or access quotes from a number of carriers. Progressive and eCoverage are examples of companies with Web sites where consumers also can bind coverage online.
For commercial lines, there are fewer examples to cite, but business-to-business examples of automated underwriting exist. AIG AIG addressee indicator group (US DoD)
AIG American International Group, Inc
AiG Answers in Genesis (religious group in defense of Scripture)
AIG Artificial Intelligence Group
AIG Australian Industry Group Direct, eWausau and AtYour all offer the consumer the ability to get quotes or rate indications or submit an application electronically for certain small-business coverages, such as workers' compensation and business owners policies. While there appear to be underwriting templates in place, none of these currently allows for binding of coverage online.
Two examples of fully automated underwriting templates exist for workers' comp comp
See comparison. insurance. Reliance National's CyberComb division and Kemper's eSource division both have applications where agents can obtain quotes and bind coverage over the Internet.
Automated underwriting is likely to expand and be a comerstone of growth of insurance and financial-services products. Online underwriting allows for greater control and more careful management of price levels. Significant expense savings can be achieved and maintained. At the same time, greater predictability of both loss and expense ratios is achievable Automated underwriting has great potential to attract agents because of the ease of use and efficiencies such as direct billing direct billing Managed care The submission of bills for services rendered–eg lab work directly to the party–ie Pt or financially responsible third party–insurance company, for whom the service was performed, rather than to the physician who ordered the test . Finally, it will be used to develop and refine underwriting criteria and pricing rules for not only multiple lines but also combinations of property/casualty and life and health coverages.
Bill Miller is a consulting actuary actuary
One who calculates insurance risks and premiums. Actuaries compute the probability of the occurrence of such events as birth, marriage, illness, accidents, and death. in Tillinhast-Towers Perrin's Irvine, Calif., office with a specialty in workers'compensation business and actuarial ac·tu·ar·y
n. pl. ac·tu·ar·ies
A statistician who computes insurance risks and premiums.
[Latin consulting. Becky Adriaenssens is the founder and president of San Clemente San Clemente (săn klĭmĕn`tē), city (1990 pop. 41,100), Orange co., S Calif., on the Pacific coast; inc. 1928. Camp Pendleton, a large U.S. marine base, adjoins the city, which is chiefly residential. , Calif. -based InsBytes, a company that provides automated underwriting products and consulting services Noun 1. consulting service - service provided by a professional advisor (e.g., a lawyer or doctor or CPA etc.)
service - work done by one person or group that benefits another; "budget separately for goods and services" .