For commercial insurers, underwriting is the foundation of growth and profitability. New data sources, better analytics and more automated systems are giving insurers expanded options for improving underwriting quality and productivity. Indeed, when Accenture polled more than 550 North American commercial lines, specialty lines and reinsurance underwriters on the major challenges they face today, the overwhelming majority (93 percent) said that investment in technology was the best way to improve underwriting quality.
Two-thirds of respondents said, as well, that technology has significantly improved underwriting performance. However, more than half of respondents (54 percent) said technology also has increased their workload – mainly due to lack of data integration across their company (cited by 81% of that group). Lack of process integration (67 percent) and insufficient training (57 percent) were the other major reasons for increased workload cited by respondents.
Half of organizations surveyed are implementing, or planning to implement, technologies such as geographical risk concentration, underwriting and exposure management. And about half are implementing – or plan to do so in the next three years – new technologies such as product development tools, collaboration tools, mobile technology for customers, or geo-coding. The majority of carriers are investing in automation, predictive modeling, data verification and collaboration tools to improve their underwriting function.
Just making the investment in underwriting technology is not enough; half of underwriters responding believe new technologies implemented have not met effectiveness expectations. Drawing on our experience working with global carriers, we have identified five core traits that can enable carriers to get the results they need from their underwriting investments:
1. Clear goals and measures. Carriers developed many underwriting tools as a response to the need for an underwriter desktop or workstation, but without a clear aim on achieving a business need--such as improving speed-to-market. Another comprehensive study by Accenture found that by deploying the right underwriting components well, insurance carriers can increase targeted growth by 15 to 20%; lower underwriting leakage (the loss from an underpriced policy compared to the policy's cost) by 30 to 50%; and reduce non-value add activities by as much as half.
2. Innovative process and ideas. The effectiveness of any underwriting technology project depends on the quality of the process it will support. Nearly 40% of underwriters in the survey view their frontline underwriting practices as average or deficient. Once carriers understand process inhibitors to growth, they can better draw on innovative ideas, such as new analytical capabilities or data sources, to help them think and behave more productively with minimal impact to underwriters.
3. Information at underwriters' fingertips. Almost 50% of underwriters surveyed believe that there is room for improvement around accessible intuitive tools. Many underwriting environments today are littered with various tools--software applications, templates, web sites, excel spread sheets, and so forth--designed to "help" underwriters. It often means that underwriters spend their time jumping from task to task, re-entering data into different tools to reach a decision. Every extra system, tool, data entry, and mouse click adds to underwriting complexity, inefficiency, cost--and a less-than-positive underwriter perception of value from a carrier's technology investments.
4. Modern operating model. Similar to the underwriting process, carriers need to evaluate their overall operating model as part of developing an underwriting technology solution. Particularly, carriers need to know how well their authority structure can contribute to business improvement. Governance and controls that align to overall process timeframes and goals should be in place to nurture underwriting effectiveness. In the survey, both insurance underwriters (82 percent) and management (84 percent) rate underwriter controls as important or very important.
5. Greater management insight. Tracking results and leading indicators across operational, transactional and quality metrics yields insights into underwriting performance. Operational metrics track underwriting efficiency through premium, staffing, systems and data cost trends. Transactional metrics track sales submissions, quotes, and bind rate data by geography, line of business and market segment. They also track rate adequacy on both new and renewal business. Quality metrics rely on qualitative (such as underwriting leakage) and quantitative (such as actual versus target mix of business) measures to assess underwriting quality.
Insurers can drive improvements in underwriting and differentiate themselves competitively by focusing on the effectiveness and efficiency of their technology and process investments. Emphasizing more effective underwriting technology solutions calls for insurers to have clear performance goals and integrate the new technology and data into the workflow for the underwriter. Performance management and governance around results will help insurers stay on track to achieve business goals through the market cycle. Ultimately, carriers that break away from the pack will be the ones that get the most out of their underwriting capability investments.
About the authors: John Mulhall is a managing director in Accenture Property and Casualty Insurance Services and the management consulting lead for insurance policy offerings in North America. Michael Reilly is a managing director in Accenture Property and Casualty Insurance Services.