Will Insurance Customers Rule in 2018?

The ubiquity of the internet and the ease of access thereto has given consumers more informed buying power and instantaneous ability to satisfy their requirements for goods and services. Organizations that can meet and likely exceed consumer expectations will dominate their industry(ies).

For insurance, the obstacles are obvious: high cost of delivery, service challenges, historic resistance to change, product and insurance vertical stakeholder complexity. All these challenges are interrelated; industry/product complexity naturally lead to service challenges and higher distribution costs. Compounding the problem is an insurance industry-wide entrenched resistance to change.

How big is the problem and how will it be solved? Anyone somewhat familiar with the insurance industry would agree that the cost of distribution is too high. In fact, current technology has done very little to cut distribution costs despite the increased spending on technology. Traditionally total distribution costs have ranged from mid-high 20% to low 30% depending upon the line of business. Surprisingly, or maybe not, direct vs. agency distribution only has a slight impact on distribution costs.

Is a 30% distribution expense really a problem? The insurance industry delivers paper (or better described as an intangible promise to pay in the event of an insured peril). Paper was the traditional delivery packaging, but electronic documents are becoming quite prevalent (not withstanding regulatory requirements). In drastic comparison the automotive industry’s distribution costs are about 15% (a recent PwC paper “2017 Automotive Trends” by Rich Parkin, Reid Wilk, Evan Hirsh, and Akshay Singh confirms this statistic). The obvious observation is that the automotive industry can distribute vehicles for about half the cost (as a percentage of product cost) than insurance.

In an industry a little closer to home, the travel industry, which has changed dramatically over the last 20 years has a distribution expense ratio between 4% and 20% depending upon the distribution channel chosen and the nature of travel. This is much like insurance with regards to the wide array of distribution options. I think that most can appreciate that less complex insurance solutions (like many personal lines products) can and are moving to the self-serve continuum in favor of greater savings. While more complex commercial solutions will tend to require more professional advice and advocacy in addition to a greater emphasis on advocacy, advice and risk management adds on.

Solutions that challenge the current status quo in insurance distribution must embrace the fact that distribution costs are a key element to creating happier customers with lower costs. As well as the acceptance that insurance distribution will never be “one size fits all”.

How will current insurance organizations and stakeholders be successful in dealing with the reality of creating a more efficient and less costly distribution system? The following are a few things that rank very high on my list of priorities that should be considered by any insurance company wishing to stay relevant to customers.

Automation, commonly referred to as Robotic Process Automation (RPA), can drive dramatic reductions in overall costs in distribution. Insurers spend far too much on manual processes that could easily be replaced with RPA. Internal policy administration costs, depending upon the level of manual processes and complexity of products can be reduced by half if not up to 75% of current expense levels.

Most current solutions are developed to solve only part of the problem. Take policy administration systems for insurers and agency management systems for agents. They do not naturally work together. It takes a lot of resources to create integrated solutions between the multitude of agency and policy management systems. The industry would do well to recognize itself as an ecosystem and look to create solutions that work for the benefit of all entities in the ecosystem including customers.

In fact, a recent article in the January 2018 McKinsey Quarterly, “Why Digital Strategies Fail” by Jacques Bughin, Tanguy Catlin, Martin Hirt, and Paul Willmot, wisely makes a point of identifying that “platforms that allow digital players to move easily across industry and sector borders are destroying the traditional model with its familiar lines of sight.”

The insurance industry is very much an ecosystem where insurers can be both competitors and partners. Reinsurers, Agents, MGAs, Insurers are intertwined almost like no other industry. Indeed, the very nature of insurance is the spread of risk.

It takes multiple stakeholders to share in risk to fulfill market needs (up, down and sideways in the insurance vertical). If those stakeholders were able to seamlessly work together and share information in a common platform it would open tremendous opportunities for new products and markets and reduce the frictions that drive costs up.

Artificial intelligence (AI) driving many technological advancements, including chatbot technology, holds lots of opportunities for greatly improving customer experience without tremendous impact on costs. AI can also help with customer experience in the form of improving product recommendations to more closely match the requirements of individual customers.

Insurers starting their digital journey shouldn’t look for the Holy Grail of solutions. I say this, having personally witnessed the failed implementations of more than a few insurers that undertook a “next generation” approach to systems replacement. For any organization the amount of change required would be an incredible test, but for insurance it is a herculean challenge. Keep the projects contained and small, seek quick wins.

Let your organization learn in small easy to digest pieces. Many opportunities won’t require a full immediate integration with an organization that may otherwise seek to kill the opportunity, almost like the way the human body will seek to destroy viruses that it identifies as a threat to its health.

Now most new “disruptive” opportunists are seeking to cut out the broker function to reduce overall distribution costs; as one of these “disrupters” puts it: “Insurance help without the Insurance agent.” However, the broker serves a critical function in the insurance vertical. Insurers have been supportive of comparative raters that may ultimately drive customers directly to their portals. Other means of diminishing the broker function as a cost reduction tool are several new direct writers who have entered niche markets.

Customers don’t just want comparisons or quotes, they want advice (especially when it comes to insurance). That form of advice is not necessarily verbal advice from an agent. If we are going to meet those customer expectations as an industry we are going to have to be creative on how we can give customers great advice without the traditional elements that drive prices up.

The key issue is that fundamentally insurance customers are served not only by the lowest cost, but by choice, advice and advocacy and neither comparative rater nor direct writer can meet those consumer needs. What the insurance industry needs to do is become more customer friendly by changing our view of the industry and leveraging technology to achieve not only lower distribution costs but improved customer satisfaction.

Digitization: “Get a horse!”

“Get a horse!” people would yell in the early 1900’s as motorized vehicles were starting to gain in popularity. The majority of the population would not believe or could not understand that the trusted horse used for over 1,000 years could possibly be displaced by a machine.

This disbelief led to public displays that included races between horses and cars. In 1900 the Automobile Club of Great Britain and Ireland organized the 1,000 Mile Race with the goal to prove that the car was “a serious and trustworthy means of locomotion; not a toy dangerous and troublesome alike to the public and its owner.”- Brisbane Courrier.

Today it is hard to believe that anyone would question the superiority of automobiles over horses for practical transportation. And, then again, all the wonderful next generation of inventions that the automobile spawned.

How does this have anything to do with the insurance industry? At this moment and from now on everything! The burning question today is going digital. Even the Geneva Association (leading think tank for strategic insurance and risk management issues) has entered the debate and issued a paper called “Harnessing Technology to Narrow the Insurance Protection Gap” just last month. They suggest that by investing in digitization existing protection gaps can be narrowed. Insurers will be able to reach more customers easier, cheaper and insure sectors that have typically too expensive to reach.

I see a broader opportunity for the industry to recreate itself. However, I have seen that insurers and insurance agents have been reluctant to invest the necessary resources to even begin the journey. In a recent article, Pat Speers (former editor-in-chief of Insurance Networking News) comments on the Geneva paper and, in my opinion, nails the industry on the head by saying “…the global insurance industry is known for its conservative, “walk before you run” culture, and for insurers of all sizes, digitization requires an enterprise-wide transformation of technology, vision, and execution.”

Implied in the paper is the reality that significant investment over time will be required to achieve digitization. Or, as Pat Speers sums it up “…digitizing the entire value chain will require significant investment of time and resources over a multi-year period…”. While I agree that it is not a “cheap” investment, I know that a reasonable investment (as in less than $1 million) will absolutely get any insurer digital.

Having been involved heavily in the digitization of the industry for the past half-decade, simply suggesting that firms must undertake the journey to digitization or face their own irrelevancy in an increasingly digital marketplace is not enough. The problem, as I see it, is that it is very much like my original example where most found it very difficult to understand that a machine could beat a horse. I think that the concept of what digitization means is very hard to understand or accept.

From my perspective, a digitized insurer is NOT:

  1. An online consumer or agent portal or
  2. Ability to have customers reach you any way they want including via smartphone or
  3. 100% of your information contained in data or
  4. The ability to service your customers or agents in real-time or
  5. Instantly issue new insurance policies upon conclusion of the sale or
  6. The necessity to leverage “Cloud” technology or
  7. Paperless environment

It is all the above and more.

As well, it takes more than digitization of one stakeholder in the value chain, it takes all stakeholders working together to make digitization a reality. Which is why, right now, the opportunists are eliminating insurance agents and offering direct to consumer insurance. But it is not only down the value chain, it is up to reinsurers as well. ALL stakeholders must work together to benefit together.

Being costly and difficult to understand is just the beginning. I have heard just about every excuse as to why the journey to digitization must be delayed (and yes, these are real comments):

  1. “We just don’t have the resources to invest.” This is the weakest argument of all. Given the advantages that digitization holds as well as the potential of extinction of those that don’t invest it should be a number one priority of every board and every executive of every insurance company.
  2. “We customize our products to individual customers, underwriting is our core competence and cannot be reduced to strict rules and rates.” Having worked with many insurers over time, this is a provably false argument. Of course, if you digitize you must have a defined set of rules and rates. When it comes down to it, there are few products that can’t be expressed in a set of rules and rates. The process to map your rules and rates doesn’t have to end with 100% total digitization, but even 75% to 80% is an achievable and desirable goal.
  3. “We don’t have rates and rules.” Believe me, this is an excuse that I have heard. Quite frankly, I don’t have an answer for this one. Not sure when these groups will go out of business, but the odds aren’t good.
  4. “This won’t integrate with our legacy systems.” Don’t let legacy systems prevent digitization and, in fact, since legacy systems were built before the concept of digitization was imagined, this shouldn’t be a problem. I have had a CIO state that it would cause “duplicate entry” – don’t make me laugh!
  5. “This will reduce my head count.” While no one has explicitly expressed this thought, I am confident that more than one CIO or Chief Underwriting Officer has viewed this as a negative. Yes, if you are applying the right concepts to achieve digitization, head count reduction is a reality. Managing this head count reduction is going to be a challenge.
  6. “We can already issue policies, we just can’t rate.” There were a few things completely wrong with this company. Firstly, they were still in business and doing quite well. Secondly, they did not understand the concept of digitization at all. And lastly, they ended up buying a seriously expensive policy administration system (hundreds of millions of dollars) that largely will not take them into the digital era. Yes, the future will see winners and losers, this one’s fate can only rely on the industry remaining status quo for a long time.
  7. “We just invested a ton of money in a ______________ system. We can’t justify the investment in digital now.” Like the case in #6, sometimes mistakes are made. It is a virtue to change your strategy when new information comes to light.

Or is your excuse simply “Get a horse!”?

Mail is a 4 Letter Word

Last week I received 6 letters from the same insurance company. It was for one single travel medical policy (one letter addressed to each member of my family). The letters were informing us, individually, to please contact our insurance broker to renew our policy (which we did purchase on line, originally??). The really sad part of this is that the policy was for a total annual premium of less than $300.

Just like mail usually does in our household, these sat unopened on the front hall table for the whole week. Funny thing though, during the week I received 4 more Insurance documents. One was a standard auto policy, one for a renewal “notification” of a collector automobile policy and 2 policies from my broker (both policies were from the same insurance company but one was for auto and one for my homeowner’s insurance – yet I get a “package discount”). This was way too much to resist writing about.

I meet brokers and insurers on a regular basis, I have been both. There is something broken when I have to get so much “snail” mail. Even worse than the service was the cost; 7 X 77¢ + 2 X $1.20 and 1 X $1.75. Brokers and insurance companies have to find a better way to service their clients. I know I would rather get an email notification with all relevant documents. If a payment is required, it should present me with a link where I can pay securely on-line.

Before I could even publish this article, I have received 6 more renewal reminder notices from insurers to contact my broker and 1 reminder from my broker that I have a policy about to expire in 3 days (which, thankfully, I can go on-line to pay), which was actually sent to the broker by email and they forwarded to me. Broken is the term I would use.

In a world where even governments are becoming less and less dependent on the postal system and going to more and more internet based service delivery, the insurance industry is ensuring that the postal system never dies! Just in one week alone, I received insurance documents in the mail costing (for postage only!) almost $10. Or $9.54 to be exact.

I know there are going to be those that don’t think that this is much. However, this is happening annually, for millions of insurance customers. The total cost of postage is only the most obvious cost in the equation. How about the cost of insurance courier to get the policies from the company to the broker? What about the cost of the mail room staff that have to prepare the mail? How about the cost AND waste of all of the paper and the ink and time to prepare those documents?

Unfortunately, I know that there are certain insurance documents that will require old fashioned delivery. And, there are people who need to have paper mail delivery (although that segment of the population continues to dwindle every second).

I was asked at an industry forum recently, “What should brokers (and companies that deal with brokers) be most worried about?” My answer was simple; be worried about what you haven’t seen yet. It is the unknown who will eat your lunch tomorrow. In this technological age, how can any company afford not to invest in the right technology just to stay competitive? I am not even suggesting that is competing.

Electronic policy delivery, notification and payment are pretty standard fair, yet why are there so many insurers and brokers clinging to a paper model? A telltale sign came from a 4 year old study from a major consulting firm uncovered that more than three-fourths of respondents (79%) rate themselves as “average” or “among the weakest in the [Insurance] industry” in their abilities to provide their customers with multichannel access to their services. More than two-thirds (70%) rated themselves as “average” or “weak” in their capacities to tailor products and services to customer needs. Nearly two-thirds of insurers (64%) gave themselves similar marks in their abilities to provide innovative products and services. Food for thought, or spark to ignite a firestorm?

Breaking Free from Traditional Underwriting

Most of you who know me or read this blog, know by now that I am not a big fan of Legacy Thinking in Property and Casualty Insurance. While it is wonderful that new technology allows so many things that couldn’t even be imagined 5 years ago, until we break free from traditional underwriting methodology, don’t spend another dollar on chasing new technology investments to improve underwriting performance (improve premium volume, broker satisfaction, hit ratio or loss ratio).

P&C underwriting has done very little to re-invent itself since the dawn of insurance; Someone fills in an application for insurance, that application for insurance gets sent to underwriter(s), hopefully the person submitting that application for insurance receives back a quote(s) and ultimately a risk is bound by an underwriter.

Today that application can be on-line, it can be instantly quoted and even instantly issued and paid for, but fundamentally, it is still done the same old way. Underwriters (be it software or actual people) assess the risk through a set of questions to:

  1. Determine risk acceptability
  2. Determine risk pricing
  3. Determine correct coverages and forms
  4. Give quotes and ultimately issue insurance policies.

In order to truly break free from traditional underwriting you have to view the underwriting process from the completely opposite direction. Instead of an entirely traditional risk based view; where underwriters want to ask all of the questions for the sake of “correct” risk based pricing. We have to view the process from the client view who wants to go through the process as easily and painlessly as possible.

From the consumer’s perspective, Insurance is not a candy bar or a new car, tangible things that when they are purchased, give the purchaser a certain amount of satisfaction. Insurance is an intangible thing that offers to pay you when something really REALLY bad happens. Think about that, as inevitable as death, taxes and insurance.

I absolutely agree with proper underwriting and risk based pricing, but I am suggesting that keeping the client in mind when underwriting, an underwriter would:

  1. Reduce the number of questions asked through
    • Reducing redundant questions
    • Smarter questions get more information from fewer questions
    • Use outside data sources
    • Get rid of all questions that do not:
      • Qualify the risk
      • Rate the risk
  2. Remove any ambiguity
  3. Understand the absolute value of a question. There is a cost to complexity and keeping the insurance quote transaction as short as possible may be more valuable than asking 3 questions to determine a 2% discount
  4. Ask enough questions in relation to the expected premium size. Often underwriters still underwrite small accounts with exactly the same questions and process as the larger premium accounts
  5. Keep the rating uncomplicated. Complex rating comes with a host of issues including a much greater chance of error. As well, a lot more arduous task for the end user

For example, I recently reviewed the rating of a relatively simple product. There were 27 rate classes for one particular coverage, which equals 27 questions on the original paper application (needed a revenue value for each one to get the rate).

A lot of the rate classes were less than 2% apart which means on a $2,500 to $5,000 account (with several more coverages) the premium difference on that coverage was about $1.50 or less. On a $2,500 total premium policy that is 0.06%! This was a point of contention for the sake of  “that is how it is always done”.

We were able to easily reduce the number of questions to 5 without losing any significant rating integrity but greatly improving the end user experience.

If anyone is simply taking their paper world to the digital world, which can certainly be done (and unfortunately is), then the improvement would only be incremental in the best case scenario, rather than an astounding leap in profitability and growth.

I have heard many times that it is the lack of broker/agent technology adoption that causes the failure of insurer’s projects to leverage technology.  This is completely false, Brokers/Agents are desperately seeking new technology solutions!Just not technology solutions that don’t work for them.

The failure, in fact is that the project was most likely given to underwriters to give the technology consultants/analysts all of the paper processes to recreate digitally and that is what causes the lack of success of what was supposed to be enabling technology. Your technology people can only do what they do… technology.

Technology consultants/analysts won’t re-engineer your insurance process.

Insurance Automation – Changing Culture

A political science professor that I had described how difficult it was for communist countries to convert to capitalism. He proposed that the longer the country was under communist rule, the harder and longer it was to change to capitalism; for every year a country was under communist rule, it would be at least as many years to convert to capitalism.

Obviously there are many reasons why this has a basis in fact, but the take away for the insurance industry is that embracing technology and automation from the current very manual/traditional way of doing things requires changing a culture. This is a culture that does not like change. Unfortunately for many, they won’t be able to make it in time. It is no longer a “directs or banks” vs. independent broker distribution battle. It is the now unknowns, like Google, in the US and likely Canada soon.

This is happening because there is a lot of opportunity for non-traditional insurance entities that aren’t bogged down with significant legacy issues . One cannot assume that the answer to competition lies only in the acquisition of new technology. Even small changes are resisted by a culture that has not had to change. Too many times I have heard the argument against implementing change as “because that is not the way it is done”.

The new entrants do not have the same limitation of breaking through embedded culture. They simply see this as an opporunity and I am very sure that we’ll see how things are currently done become quite obsolete much sooner than many in the industry would expect. It is both exciting, but also very frightening. While the Canadian Insurance Industry has had some success in lobbying to keep banks from gaining certain competitive advantages, they won’t be able to do anything about a new entrant, like Google.

In fact, given the deep rooted culture of banks, they should not be the greatest worry. Some have already given up. However, an aggressive new entrant with money, a culture of embracing change and challenging status quo is going to be a far more formidable foe than a bank.

How will existing insurers; direct or broker based and independent brokers compete? Obviously, I think it is going to be harder than anyone expects. However, I think the challenge will be to understand that current culture is going to have to change and the sooner the better (the first point in this article is that cultural change is extremely difficult to implement). Some suggestions to compete:

  1. Be aware of current advantages held by incumbents: current relationships with customers. Absolutely concentrate on building closer relationships and not creating any need for your current customers to seek alternatives.
  2. Ask yourself “do we encourage new thinking?” and “do we challenge ourselves to seek better ways to improve our current work flows and improve our customer relationships?”. The culture required to compete has to ask the hard questions. Take a look around and see if you can identify some very significant cultural changes that have occurred in your organization in the last 10 years.
  3. Understand that change will likely not come from incumbent personnel. It has to be championed from the top and will likely require a substantial investment in new personnel that may be younger, more educated and technologically savvy.

Too much emphasis is being placed on new technologies that will have varying affects on the insurance industry; telematics, big data, Internet of Things and even driverless cars! Time to focus on what will affect the insurance industry; changing culture to adapt to everything else that is happening. The sooner it starts the better.

Reducing Error Ratios in Underwriting; For Compliance and Cost Reduction

Over the years I have been involved in a few Insurer studies regarding the cost of mistakes. The most obvious, to an underwriter, is the cost of re-issuing policy documents processed in error. No one publishes these statistics (too embarrassing), but I am sure that almost every insurance company, at one time or other, has done similar studies and or tracks these mistakes as a KPI.

As I was searching for information on this subject I came across this article from http://www.insurancejournal.com/news/national/2013/10/09/307617.htm regarding the top 10 market conduct complaints (2013) by regulators against P&C Insurers. It refers to a study published annually by Insurance Compliance experts; Wolters Kluwer Financial Services. According to Wolters Kluwer Financial Services, the top 10 most common market conduct compliance criticisms for property and casualty insurance are:

  1. Failure to acknowledge, to pay, or deny claims within specified time frame
  2. Using unapproved/unfiled forms and rates
  3. Failure to provide required compliant disclosures in claims processing
  4. Improper documentation of underwriting files
  5. Failure to maintain claims documentation
  6. Failure to process/pay total loss claims properly
  7. Failure to provide required compliant disclosures in underwriting processing
  8. Failure to adhere to producer appointment, termination and/or licensing requirements and adjuster licensing requirements
  9. Failure to issue compliant adverse action underwriting notices
  10. Failure to apply rates, rules and guidelines correctly

Besides the obvious claims mistakes half of the top 10 criticisms come from Underwriting – the area of my interest. I thought I would take a quick look at one state regulator’s website to see what the latest compliance monitoring reports contained. I only looked at one report, out of the many that were there for 2014 here is just a small sample of what I found in Underwriting Error Ratios:

  • From the universe of 270 policies, the 247 violations were based on 144 files resulting in an error ratio of 53%.
  • The 17 violations noted were based on four (4) files resulting in an error ratio of 57%.
  • From the universe of 3,662 policies, the 3,050 violations were based on 2,052 files resulting in an error ratio of 56%.

What we have here is a bigger problem. Here is where mistakes can be quantified in fines. All of the above compliance issues directly relating to underwriting errors have a huge cost in regulatory fines. I suppose that some may argue that this only affects insurers in the standard market and that Excess and Surplus Lines carriers are not as regulated as the standard markets. However, mistakes are still very costly and the obvious examples show how frequently they happen.

So what can be done to reduce error ratios? This is where having a partner help you with implementation of an automated underwriting solution. In our implementations we have discovered institutionalized errors. A classic example of that is a common policy wording that, over the years has been copied, modified over and over again, yet, having the same error within the wording that finds its way on to every policy issued with that wording. Implementation of automated underwriting allows an insurance carrier to examine their underwriting workflows and practices thoroughly. As well as to test the validity of certain common practices within a new framework.

Imagine an underwriter that works 24/7, never takes a break and never goes on vacation. Even more amazing is that this underwriter never makes a mistake; always calculates the correct premiums, attaches the right coverages and never accepts an unacceptable risk according to the guidelines. That is what automated underwriting is all about.

In addition to the obvious benefits in the previous paragraph, an automated underwriting solution delivers real time quotes, policy documents and inquiry. Carriers with successful implementation can see huge gains in efficiency with everything from a paperless work environment to staggering improvements in hit ratios, reduction in Not Taken Up and much happier brokers and customers.

Using unapproved/unfiled forms and rates

All forms face rigorous scrutiny as they are converted and stored as HTML. When they are automatically assembled into the pdf document they become a part of a policy. Rates are thoroughly tested and the filing is automatically produced with the underlying rates, rules and wordings.

Improper documentation of underwriting files

All documentation for the underwriting file is centrally stored every piece of underwriting information including pictures, documents, policy and application are contained within the policy. It also makes it very easy to conduct an underwriting audit.

Failure to provide required compliant disclosures in underwriting processing

The whole underwriting process is automated including the proper disclosures required by the various regulatory body (on a State by State basis).

Failure to issue compliant adverse action underwriting notices

As above. An Automated Underwriting solution can produce notices by triggered events. Once the rule is set, if an event happens where a notice has been triggered any pre-programmed underwriting notice will automatically be sent.

Failure to apply rates, rules and guidelines correctly

All stored in data and procedures. The filing is produced from this stored procedure.

If you wish to discover more on how an automated underwriting solution can fit within your organization please contact Steve Kaukinen at (905) 334-2070 or steve@bindeasy.com.

Legacy Thinking

The promise of a better way to enable the P&C Insurance industry to do business has been an expensive and ongoing voyage, a voyage that some think is a myth while others hope it is reality. SEMCI (single entry multiple company interface), Real Time, “Once and Done” are still far away for most as a reality. Even though over the years enough money has been poured into potential solutions, the attainment of the desired end state is still more of a myth.

Too much weight has been placed on the use of technology as the answer to the question of, “how do we deliver on the promise of a better way?” If technology were the answer, then I am sure that we would have already reached the solution.

Legacy is a huge issue, both within the Insurance Companies but also within brokers. Don’t assume I am referring to technology legacy. Sure, legacy within systems, both broker and company, is a major issue, but legacy within workers (lack of training or improper skillsets) and legacy within workflows is as big if not bigger factor than the legacy systems that most still rely on. Don’t be fooled either, even if the technology comes as SaaS (software as a service) or is mobile or is promoted as the latest and greatest, I can guarantee that there is still legacy within the architecture (built by humans with legacy thoughts and knowledge).

Real change is going to only happen when we can break through generally accepted legacy thought and workflow. The next step is not going to be incremental. To take advantage of the latest technology there is going to have to be a complete disassociation from past practices and mindsets.

To sum up, the technology is absolutely ready now to deliver, but the biggest barrier to delivering SEMCI and real time to new policy, renewal policy and policy change is the human factor.

In fact, change is already happening amongst us. There are thousands of brokers who are issuing policies in real time as well as creating policy change in real time and all other aspects of the policy life cycle all in a real time mobile environment. It is so subtle, that most would not even know that is what they are doing.

A few brave companies have stepped into this new world, leaving their legacy thoughts behind, and are benefitting from enabling their brokers to do business in an unthought-of new work environment. This new work environment is completely mobile, lets brokers get quotes instantly, issue no-error policies in real time, make policy changes in the same fashion. Time that used to be spent on tedious paperwork can now be put into client relationships, both existing and new.

In addition to those obvious benefits, these insurers are dramatically reducing their cost to issue insurance policies. They did not let Legacy Thinking prevent them from making these dramatic improvements to their and their client’s organizations.

Automated Underwriting – ITS as Easy as 1-2-3-4!

Here is a real example of the power of automated underwriting; 1 month from contract to implementation, 2 products, almost 300 individual brokers and over 400 issued policies in 4 days.

If you are seeking a dramatic turnaround in a product line or your entire business, you should consider a platform that can deliver the actual results that allowed one insurance company to sign contract and implement within 1 month with 2 products, 300 brokers and over 400 issued policies in 4 days of being live.

It is likely a record from contract to implementation to success. It shows that if you are capable and determined anything is possible. This was not expensive and demonstrates how incredibly easy brokers can quote and issue policies within almost impossible timeframes.

This implementation included an added product to the original that is contributing new business at a rate of 10% of total policy growth and over 20% in total premium growth. Policies are being issued, during working hours and not 24 hours, at a rate of over 12 renewal policies per hour and over 1 new policy per hour.

Amazingly, with brokers entering the data to quote and issue, the error rate, as identified by flat cancelled policies, is impossibly low at about 2.5%. 99% of all policies were issued through automated underwriting requiring no touch by insurance company staff.

This may seem quite fantastic, but it is true. A very recent article extoling the virtues of technology for insurers and the fact that if insurers don’t apply the latest technology to their business will leave the late adopters in the dust. I agree ITS the future of insurance.

Automated Underwriting – Best Technology Investment

10 Reasons for Implementing Automated Underwriting Solutions Now to Positively Impact your Bottom Line

Telematics, Mobile solutions, Internet, Social media, all technology considerations for insurers today. Do you know what the top technology investment today that can have immediate impact on the bottom line is? The greatest ROI out of all technology investments today is an Automated Underwriting Solution. This article explains why P&C insurers should seek to implement automated underwriting solutions now.

Automated underwriting solutions (AUS) do exactly what they sound like; automate the process of underwriting taking much of the work done in manual process today into a “no touch” low cost environment. Typical manual tasks include; quoting, policy issuance, document management, reporting, message notifications, inquiry, policy modification, filing, mailing and cancellation.


Increased automation benefits customers, brokers, insurers and reinsurers. Not only can the delivery of insurance products be real-time fast, but the cost benefits to all are greatly enhanced.


Benefits of Automated Underwriting Solutions include:

  1. Impact on Bottom Line Profit. AUS offers very tangible cost savings in staff, work orchestration, speed of reporting, eliminating non-qualifying risks before they enter the door. Paper, handling and mailing costs are substantially reduced. Very dramatic cost reduction for a relatively small investment. With all of the ease that AUS offers to brokers, more business naturally flows in the doors – like a little twig in a big stream.
  2. Greatly enhanced workflow. Typical interaction between underwriter and insurance broker, in a non-automated environment, includes multiple and repeated data entry at every level, frequent communication back and forth, even before any sale is made, paper and more paper. Automating the process from broker through underwriter asks the appropriate set of questions, allows for supplementary information if required, routes the request (quote, renewal, policy change) efficiently through the right process. In the example of a new business request, it will give an instant indication which can either give permission to issue the policy, an opportunity to submit supplemental information for an updated indication and permission to issue or to be submitted to an underwriter for further scrutiny or an immediate decline.
  3. Error Reduction. By having one data set shared between underwriter and broker and well-designed interfaces and underwriting question sets, virtually eliminates any non-human error. In a non-automated environment the intervention required by many, each with their own system greatly increases the opportunity for error resulting in a much greater workload.
  4. Paper Reduction. Modern technology literally allows a completely paperless underwriting process. This, in turn, means no more paper handling or mailing. Information is instantly available at your fingertips on any wireless device.
  5. Customer Service & Premium Growth. If an insurance broker can offer clients an instantaneous way to obtain an insurance quote, then in most circumstances, allow the broker to issue a correct policy document. This is the kind of service that is standard in most other industries.
  6. Better documentation and information. AUS documents and tracks all data and changes by user. The mystery of how something happened doesn’t exist in an automated environment. All activity is tracked and proper interface allows for a permanent historical and reportable record of every policy.
  7. Enhanced filing process. By having everything in data, month end reports occur at month end. Reports including policy bordereaux can be accessed instantaneously by multiple levels of users. Reinsurers can have their data as quickly as insurers.
  8. Greatly improved underwriting process. By eliminating many sources of error and improving workflow to allow for underwriting intervention the process becomes a decision making process rather than a “paper pushing” process. Underwriting rates and rules are followed, authority levels are adhered to through the orchestration engine.
  9. Better governance overall. Without a doubt, the governance of the underwriting process becomes very sound. Many companies embarking upon an automated underwriting solution are surprised when they are required to go through the exercise at how many errors are contained in their current underwriting guidelines and even policy wordings!
  10. Easier auditing. To wrap it up all in a bow, a person familiar with auditing a paper policy non-automated would appreciate an automated audit report and instant access to any file electronically. Specific attachments and certain risks can be flagged for special attention. Finding all policies with a certain wording, in force or expired, is not a problem.

Why move towards Automated Underwriting Solutions now?

While the benefits and reasons to move to an automated underwriting solution are obvious, a key reason for not moving has been cost of the solution. With improvements in technology and technology delivery and dropping costs, these types of solutions are becoming very affordable.

Most use the excuse that you have to have the “Big Bang” approach to adopting an AUS or other insurance technology solutions – where it is all or nothing (this is too big a risk, starting small limits your investment AND risk). If you take reasonable portfolios and commit to converting to an AUS, you will realize results much sooner and understand the commitment required for success. Trying to convert all in a Big Bang approach can have disastrous results both in terms of risk and level of commitment.

Unrealistic timelines, expectations and fear of change are other reasons to delay. However, if you want to test the water and initiate a small project of adopting an AUS, then the time has never been better.

An even more compelling reason to consider AUS is that your competition is doing it today.

A few key signs that you should consider AUS implementation immediately


  1. You have a combined ratio that exceeds 100%.
  2. You are issuing printed insurance policies and mailing them out.
  3. If you are issuing pre-printed booklets of coverage, not customized wordings

  4. Your underwriting hit ratio is less than average amongst your competitors.
  5. If it takes longer than 1 day to issue a policy.
  6. The paper on underwriting desks is heavier than the desk itself.
  7. Your policy acquisition costs exceed 26%