Imagine a street level board room in New York City where a massive parade is going by outside and the board members somehow do not take notice. As one of the most underrated areas of insurance core processing enhancements, automated life underwriting has a similar story. While great strides have been made in enabling the automation of the life underwriting process, hundreds of life insurers have been slow to acknowledge its potential, continuing to let the underwriting parade pass them by.
Automated underwriting holds the promise of better process flow, higher customer service levels, enhanced agency communications, improved tracking, more consistent underwriting decisions, faster throughput, and better mortality --- all leading to the opportunity for significantly higher profits. For those companies still unconvinced of the business value, a cursory look at these seven benefits might convince them of the compelling story for potential growth.
Better Tracking and Improved Workflow
A sound automated underwriting system implemented with workbench tools keeps applications moving. Task managers, automated alerts, queuing logic and Service Level Agreement (SLA) tracking dashboards make it improbable for a case to stop without manual intervention once it has entered the pipeline. Passing work from one stakeholder to another is simplified. This of course improves customer service while also increasing internal productivity.
More Effective Use of Underwriting Resources
If a life insurer is using its automated underwriting system for simplified issue products, it may be able to circumvent human underwriters for a high percentage of policies, enabling the insurer to better utilize its underwriters for higher value, more complex cases. If an insurer is using its automated underwriting system for more than simplified issue policies, even if it is being used primarily as a routing tool, intelligent rules can be assigned that will designate which types of cases are sent to each level of underwriters, providing better resource allocation through automation.
Enhanced Visibility and Service
Typically, checking on a case status takes several phone calls, with time wasted on both ends while the application is located. With visible tracking and dashboards, a slice of real-time case status data can be made available through the insurer's web portal or agency management software. This functionality reduces calls into the home office and provides both agents and customers with a better buying experience.
[Previously from Stockwell: Using Tech to Tame the Group Benefits Market]
Increased Consistent Decisions
Life underwriting rules that are automatically applied create consistency in the decision process under a framework that reinforces the insurer's underwriting philosophy. The automated system not only provides rules that form the basis of the insurer's guidelines, but also enforces the rules by triggering messages and escalation actions in cases where exceptions are being made. An automated life underwriting system is capable of tracking exceptions for later use in determining if particular rules need to be honed. Consistency will also help reduce confusion with agents about individual underwriting decisions.
Refined Product Development
When an underwriting department has fully-adopted underwriting automation, the insurer is free to create new products that fit the mold for automated decisions. Product Development can help complete the cycle of growth by using its full capabilities to expand product lines into new market spaces.
Reduced Paper Process
Depending upon its life application process, an insurer will create more or less paper. Eliminating paper by using a data-driven rules engine saves insurers from the time consuming process of collecting data on a paper applications, reduces imaging costs, minimizes the number of manual handoffs and decreases the points of manual failure. With an e-application tied to an underwriting rules engine, fields can't be left blank and handwriting cannot be misread. At its simplest, removing paper from the process saves an insurer from the cost of filing, manual rework and storing paper applications.
Better Mortality Results – The Promise of Data Analysis
All of the previous reasoning had one thing in common: a system improvement would rapidly provide the potential for quick returns, increased premium growth and better service. However, the most profitable piece of the life underwriting puzzle happens on the back end; improving mortality results. The structured nature of the decision process and the use of data interfaces and rules engines that are traceable has been proven to improve the overall mortality experience of carriers generating a large downstream financial benefits. Better mortality increases corporate profits compared to pricing and allows for reserve release due to enhanced experience across the book. Principle-based reserving make this impact even more pronounced.
The most impressive part of better mortality is that it doesn't represent a one-time improvement, but an ongoing data stream for actuarial models.
Underwriting modernization is a crucial step for organizations striving to remain competitive. Life insurers that are not already automating underwriting should move modernization to the top of the priority list, and those who are beginning larger administration modernization programs should keep automated underwriting capabilities in mind during the evaluation process.
About the Author: Erik Stockwell is senior vice president and head of MajescoMastek's Life/Annuity Insurance Division.