Out from under: quick, precise underwriting that reflects the latest medical treatments can cut expenses and enhance product appeal.

It's a human tendency to say, "If it isn't broken, don't fix it. What we have is good for at least another five or 10 years." What a difference a new millennium makes. In a marketplace populated by informed consumers and product-savvy agents and producers, underwriters can no longer be content to operate ha a traditional data-gathering and analysis role.

With the new century, the underwriting role has emerged as a vital, core business function, and a bottom-line pricing function at that. The market demands that underwriting be proactively aligned with new business processes, as well as support sales, and deliver to the expectations of the consumer.

Major insurance manufacturers that wish to compete must now view the traditional underwriting function in some very nontraditional ways--with the ultimate goal of making underwriting a highly visible business differentiator. Today, underwriting parameters, requirements and guidelines are being re-engineered at warp speed, compared with just a few years ago. Major carriers are performing top-down redesigns of their service delivery organizations--with a keen focus on the new business process--in an effort to improve service while compressing cycle time. They seek to answer the question: how can the traditional underwriting process be redesigned to directly contribute to process efficiency, drive expense control and improve cycle time? Wholesalers and retailers demand the best product package for consumers, and underwriting must be an integral part of that package.

Underwriters of The New Millennium

Where should the underwriter of the new millennium look to make the greatest impact on business objectives? Consider the following areas:

* Initial submission process,

* Information gathering tools; and

* Automated decision processes and online evaluation platforms.

Improvements in one or all of these areas will contribute to business goals in significant ways that are, at once, obvious and perhaps not so obvious.

Process automation benefits the new business processing of uncomplicated, "clean" cases, and these cases typically represent much of a company's application volume. Simplified application submission, coupled with effective data gathering of just the right amount of specific client information, fed into an automated underwriting process improves clean case service as well as provides a reduction in the trait cost of processing and issuing a policy. This, of course is the obvious benefit.

Efficiency improvements in clean-case processing are gained by automating those repetitive, mundane tasks that underwriters were previously asked to do. This automation frees up those vital, experienced underwriting resources, and presents an opportunity to match skill sets with case complexity. Underwriters with the greatest knowledge and experience may now focus on managing larger, more complex impaired risk or special risk cases that demand a high level of expertise and hands-on processing. These cases are the lifeblood of independent distribution. Successfully competing for and winning these cases provides the business with an important source of significant premium revenue.

Initial Submission Process

Several major carriers have introduced easier and simpler methods for producers to submit business. These range from electronic submission to "simplified full applications" to single sheet, basic information "requests for insurance." The objective of each is to make it easy for the producer and the client to initiate the insurance purchasing process. Prudential, for example, developed a single-sheet insurance request form, called a Quickform, that can be e-mailed, mailed via the U.S. Postal Service or faxed to the company. Of those three methods, Prudential found that faxing is currently the method of choice of general agencies, while electronic submission is the method used by retail agents.

Information, Please

Appropriate use of teleunderwriting, more than any other underwriting tool, allows carriers to quickly and efficiently collect underwriting data that is specific to an individual client, while reducing underwriting expenses generated by ordering para-med exams and attending physicians statements.

Couple the teleunderwriting process with an imaging workflow process and a purpose-built underwriting decision engine, and the teleunderwriter call directly feed the engine detailed and accurate information from the client interview. Uncomplicated cases can be automatically issued, while cases requiring hands-on processing are automatically routed to the appropriate subject-matter expert. Wrap all of this into an automated case-management tool that tracks case activity, triggers specific actions, communicates case status, and escalates decisions, and it's easy to see the new business process has terrific potential to accelerate processing and reduce expenses.

Other Ways to Bring Value

Competitively, it is not enough for carriers only to enhance data-collection systems and automate processes. The actual underwriting decision must balance competitiveness with the mortality objectives of the insurance company, and still be perceived by the consumer as a fair and equitable offer. To accomplish this, carriers must stay abreast of changes and advancements in clinical medicine, and then be prepared to quickly adjust and upgrade information, providing the underwriting staff with the most current underwriting guidance available. New underwriting tests or tools must be evaluated not only for their protective value, but also for their potential to support and contribute to the business goals of reduced expenses and compressed cycle time.

Prudential, for example, has established a formal process that facilitates the collection and review of medical, financial and competitive data in order to establish and maintain an awareness of the company's competitive position. Competitive shortcomings can be quickly identified, appropriate research completed, changes made, and new underwriting guidance implemented in a continuous fashion that keeps the company a step ahead of the pack. Underwriting liberalizations for conditions such as prostate cancer, hepatitis B and C, or diabetes now only trail the science that underlies them by a fraction of the time that would have been common 10 years ago.

Underwriting upgrades and product enhancements or repricings are another avenue to expand markets and profitability. Underwriting flexibility, aligned with product development, in tandem with high retention and reinsurance capacity can accommodate both brokers who shop larger, complicated cases as well as agents writing more moderate sized cases. By being well positioned in these key areas, the carrier is ready to meet the demands and expectations of agents and their clients.

More Changes

Other issues emerging in the insurance industry are changing the role of the underwriter. New mortality tables will replace existing product pricing tables, with potentially significant shifts in life expectancy. Products priced for clients aged 85 or 90 or higher demand that underwriters become experts at underwriting older age applicants. National Association of Insurance Commissioners model regulations on replacements, privacy and confidentiality rules, and other evolving regulatory issues force underwriters to become information managers as well as decision managers.

Today's customer wants advice and choice--on demand--and the pressure to deliver falls on distribution and manufacturing. Carriers and distributors with similar business objectives will naturally seek to align themselves. Underwriting is one of the tools that can help foster such reciprocal relationships, ensuring sustained profitability and success. Our world no longer moves at a traditional pace. Change will take place with or without us. How we respond to that change will be the differentiator between success and mediocrity.

Is what we have really good for another five or 10 years? The great hockey player Wayne Gretzky once explained his success by revealing that he never skated to the puck. Rather, he always skated to where the puck was going to be. Now is the time to move to where the future will be.

C. Michael McFarland is vice president, life underwriting, Prudential Insurance Company of America.