(Image credit: Adobe Stock.)
Automation is transforming the way we work and live across all aspects of our lives, including within the commercial insurance industry. Yet while there is strong evidence that automation improves straight-through processing (STP)—enabling faster speeds, greater efficiencies and fewer human errors—many commercial insurance carriers have been slow to embrace it, particularly within the small commercial segment. What’s causing the resistance? Often, it’s simply a matter of not understanding where and how automation can make a difference—which can be especially impactful in this high-touch segment.
Small commercial risk underwriting remains a much more manual process than most carriers would like it to be. Most small commercial risk applications still require some form of manual intervention, typically due to issues around information gathering and processing. For example, incomplete applications are common and require underwriters to waste valuable processing time waiting for agents to supply additional information. Once that information is received, additional validation and modification are often necessary.
Not only do these manual processes slow STP, time spent gathering, validating and modifying information is time that could be much better spent focusing on more profitable tasks or underwriting more complex risks. Compounding the problem is that information acquired manually is typically more error-prone, causing additional wasted time, effort and costs down the line post-underwriting.
Five steps to advance automation
While there will always be a place for the human element in commercial underwriting, there are a number of things carriers can do to introduce automation into areas where manual processing is unnecessary and can potentially do more harm than good. The following should be considered to increase automation-driven STP and its benefits within small commercial risk:
- Simplify applications and capture the necessary data
- Reduce human intervention
- Standardize templates and forms
- Enable agents to input more data up front
- Automatically validate and verify data
By addressing these five areas with automated solutions, underwriting teams can speed up processing time, reduce human error and unnecessary rework, and free up time to devote to more complicated, higher premium risks.
Here are some of the tools carriers can apply to achieve these objectives:
Automated loss run technology can return claim activity on risks in a standard format during the quoting process, eliminating time spent on interpreting loss runs. Essentially, automated loss runs can reduce the back and forth between underwriters and agents.
Prefill tools that automatically populate applications with pertinent business information, property characteristics, vehicle details, etc. from pre-existing data sources help carriers to complete applications more quickly and accurately. Integrating prefill technology into the workflow saves carriers time and makes it easier to do business with insureds—streamlining the application process while improving customer relationships.
Confirming prior coverage can also be automated. By tapping into an industry-wide clearinghouse of policy in force data at the point of underwriting, carriers can reduce the time wasted in gathering prior coverage data from agents directly or potential insureds.
Predictive analytics are effective in analyzing disparate, risk-specific data to assess the future loss propensity of insureds. Predictive models ingest data that has shown to be meaningful in helping determine whether there will be future claims and produce a score that enables automated risk assessment. Predictive modeling may prove to be the next big thing in simplifying the underwriting process. In addition to providing valuable insights, it also helps streamline carriers’ business operations and enhances STP so underwriters can focus their attention on more complex risks.
Despite the slow uptake among commercial insurance carriers, automation is here to stay. Carriers who want to remain competitive should implement an automation strategy sooner rather than later. The following three efforts can help drive an automation strategy that improves STP:
- Educate and engage the entire team in the automation process; desk underwriters, underwriting managers and product managers should each provide input and have a role.
- Determine critical points in the underwriting process where automated information solutions can accelerate decision-making.
- Leverage Predictive Analytics as a tool for effective STP.
Done right, automation that accelerates STP will improve carriers’ workflow by achieving greater speed and efficiency, adapting to changing business needs, reducing human error and making the best use of human resources.