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Business counselors talk about the twin emotions of fear and anxiety as a great motivator and a heavy barrier to meaningful change. They can drive us to do things we never thought we could. But they can also hinder our progress. The fear of the unknown can force us to be content with conditions as they are, even if we know intuitively that acceptance of the status quo can suppress meaningful progress. Amidst prevailing market pressures and competing strategic or operational initiatives, the prospect of integrating modern underwriting technology with existing policy administration systems can be scary stuff for property/casualty insurers. In particular, the fear and anxiety of systems integration often prevents insurers from considering advanced underwriting technology as a highly advantageous agent of substantive change and business transformation — even despite proven value, including workflow efficiency, risk assessment precision, and producer collaboration benefits, inherent in today’s underwriting workstation solutions.
Too often, the reluctance to consider state-of-the-art underwriting workstations as a natural and productive extension of policy systems is centrally driven by the perception that integration is too complex, too time consuming, or too expensive to be worth the effort.
But in reality, if planned well, integration can be much easier than expected. And the end result is a host of transformational paybacks, including breakthrough best practices for risk evaluation, workflow improvements, product flexibility and scalability, more accurate pricing, and lower loss ratios. In fact, failing to embrace full-function underwriting technology as a natural extension of policy systems may ultimately cost more for insurers, especially if their focus is in the more multifaceted and intricate arena of commercial and specialty lines.
The science of systems integration has come a long way as the insurance technology value chain has evolved in the last five years. Modern underwriting workstations—specifically designed to easily integrate with policy systems—are a fitting manifestation of rapid and reliable integration advancements. A number of commercial and specialty lines carriers have undergone successful and fast underwriting workstation implementations, including relatively quick integrations with their policy platforms.
Additionally, in the process of such integration projects, insurers gain the opportunity to take a hard look at their underwriting processes, clean up inefficiencies, and clearly define roles and tasks along the full spectrum of risk evaluation and policy service. The result: Not only do insurers get the benefit of responsive and flexible technology, but they also end up with clear, consistent procedures for accepting, evaluating, and eventually booking business. They get the differentiating benefit of being able to manage their portfolios from a strategic, account-based perspective rather than from the more limited policy-based view.
Practical Considerations
Let’s examine some of the practical aspects of integrating underwriting and policy systems. Inevitably, this type of initiative can put insurers squarely in the world of technology mapping and assessment. Nevertheless, the starting point for any integration engagement is to assess the current “front office” technology ecosystem and develop a new blueprint for the future.
The assessment is frequently complicated by the fact that the current state of policy system implementations is rarely ideal. In many cases, years of system evolutions, acquisitions, or internally generated projects and expansions have led to multiple legacy policy administration systems, usually segmented by lines of business or geography. It’s also typical that multiple underwriting processes and workflows are in use.
To visualize and plan for an ideal future state, process mapping allows insurers to understand the natural handoffs between underwriting and policy management. It lets business and technology managers see what data is used and where it originates. With this knowledge insurers can quickly gain a better understanding of how the policy and underwriting systems can and should interact, and establishes a strong foundation for a new, integrated environment.
Consider three basic design principles for successfully integrating underwriting and policy systems into a total end-to-end solution to benefit both underwriting and policy service teams. Companies that design their underwriting and policy integrations around these principles can find the task a lot less daunting and the results much more rewarding.
Data Flow and Ownership
The first design principle focuses on data flow and data ownership. What information do underwriters need to do their jobs and what data is needed by policy service personnel? There is common data used by the underwriting and policy systems respectively and it’s important to clearly define all the transactional data flows.
Importantly, the volume of data is often much greater on the underwriting side of the process, especially for complex and multi-faceted risk evaluation in commercial and specialty lines. So there needs to be a logical and productive environment to capture, assess, and store diverse categories of data, and leverage it for analytical purposes. And not just for the individual risks, but downstream for strategic portfolio management as well. Indeed, addressing the data-driven set of challenges is one of the key reasons for the emergence and popularity of underwriting workstations. Then, the data required in the policy system to rate, quote, bind, and issue needs to be accommodated. Overall, some data generated in the underwriting system must flow to the policy system and vice versa.
Product Definitions
The second design principle focuses on product definitions. Fundamentally, it’s important that the product definitions, product offerings, lines, coverages, and sub-coverages are absorbed in exactly the same way in both underwriting and policy systems.
Insurers naturally gravitate to having the support for product definition reside in the policy system, but the underwriting workstation now plays an important role in this key process, from account setup through risk analysis. Modern underwriting workstations store underwriting process and transactional information, and synchronize this information with policy platforms as the system of record for product definitions—providing a common and consistent environment for ongoing product management regardless of insurers’ organizational models.
Business Rules Taxonomy
The third design principle focuses on business rules taxonomy. That’s because it’s important to have strong discipline around business rules and where they should be located for maximum operational effectiveness. In most situations, there is a wide range of risk assessment rules that really should reside and be optimized in the underwriting workstation environment, versus rules that are most appropriate in policy systems to rate, quote, bind, and issue.
Integrated and Independent Capabilities
The tenets outlined here can help to guide insurers through successful integration of underwriting and policy systems. But success ultimately comes down to prioritizing, and then gaining, business functionality. So in conjunction with the design principles, it is most productive to envision functionality in two main categories: Integrated capabilities that require connectivity between both systems and independent capabilities that are completed within one system.
There are many ways to designate and populate those two categories. The actual integration model will often depend on the current systems state and an insurer’s appetite for a significant automation consolidation or modernization initiatives driven by business challenges or opportunities.
Having said that, a typical business functionality configuration might look like this: Product coverage selection, pricing terms and conditions, quote proposal generation, clearance, predicative modeling, and portfolio impact analysis are defined as integrated capabilities housed within the underwriting workstation. Exposure capture, risk assessment, underwriting file documentation, facultative reinsurance, and negotiations and decisions could be independent capabilities but managed within the underwriting workstation.
The integrated capabilities within the policy administration systems would include product and coverage configuration, policy issuance, rating and quote management, and renewals. Policy servicing, billing plan selection, and policy storage and referrals would all be standalone capabilities within the policy system.
Transformational Value
When configuration layers are well thought out for specific business conditions and objectives, the integrated underwriting and policy platform environment become poised and primed to deliver significant transformational value. This is especially the case when compared to the prevalent legacy model of detached underwriting automation and policy systems.
Those who have successfully integrated the two systems are better positioned to expand products or lines of business and add new, rich data sources to the risk evaluation process. Their underwriters are directed to focus on the right areas of a specific risk and to really deepen their focus with contextual information as they evaluate exposures.
Integration allows underwriters to operate within their authority levels, but also gain from the accumulated knowledge of the company’s most experienced underwriters. Successful integration also allows underwriting teams to eliminate low-value tasks, improve service levels, manage referrals and peer reviews, and better support the company’s plans for growth and profitability.
Systematic audit trails help managers meet regulatory and compliance requirements and executive management gains a much deeper view into the individual risks and account portfolios across the entire business.
Industry research indicates that underwriting innovation is one of the most highly targeted areas for modernization across all business areas of insurance. More and more insurers are overcoming their integration anxieties and embracing underwriting workstation technology as a strategic extension of existing policy systems, and as a key driver to improve profitability and growth.