(Photo credit: Jiuguang Wang.)
The insurance industry has traditionally been cautious to embrace new technologies. However, more recently, automation has started making impacts in this sector. While automation undoubtedly offers considerable benefits to insurers, some professionals are understandably concerned about the impact on jobs. This rings particularly true with underwriters. )
Underwriters, arguably, have one of the toughest jobs in the insurance industry. On the one hand, they must perform the most intensive inside-out analysis of a submitted application and underwrite the risk. On the other hand, they are expected to take an outside-in view to ultimately improve the customer experience.
When it comes to the growing influence of automation in the insurance industry, here are some of the more common challenges currently faced by underwriters:
- Manually ingesting data from applications submitted in different formats: Formats include ACORD PDF and proprietary XLS. This sometimes includes data entry into the underwriting system (UWS) in addition to data verification.
- Having multiple channels for receiving applications: There are agencies that prefer to submit applications in hardcopy paper form while others use faxes or emails as their preferred channel of submission. Often, submitted applications are not brought into a common queue resulting in mis-prioritized application processing, e.g., higher value applications are processed after lower value ones.
- Inability to pre-score applications: This is essential in figuring out which applications are ready for underwriting in terms of complete documentation, or which are low-risk, high-value applications to be taken up before others. This is important because sometimes an underwriter may spend hours on an application before realizing it is not complete, while there might be a complete high-value application waiting for their attention.
- Requirements management: This is a major area of distraction, as underwriters end up finding missing or incomplete requirements during the entire underwriting process. This results in a situation where they have put in a significant amount of effort yet the application cannot proceed due to missing or incomplete information. Further, the agent/broker may take their own time to provide the missing or incomplete information.
- Business as usual (BAU) activities: Last but not the least, there are too many BAU activities at hand for underwriters to find time to improve customer experience by improving underwriting processes or systems.
This last point is critical and a key contributor to the overall Catch-22 situation surrounding robotics and underwriters. Fortunately, newer technologies like Robotic Process Automation (RPA) and analytics can be applied in a way to deliver quick results without consuming the efforts traditional information IT projects take.
One key feature of RPA projects is that they usually don’t last very long—typically a few weeks as against months—and do not cause disruption to the existing business process. Putting that in the context of the underwriting business, you don’t have to change application forms, the submission process, or underwriting rules. Instead, you can start by automating relatively small pieces of functionality. As an example, if you find your forms are not clean enough to be processed by RPA robots, you can use RPA robots to manage missing requirements. For example, if a required field is missing, a notification can be sent by the RPA robot to retrieve the missing information. This kind of RPA will free up some of the underwriters’ time from requirements management.
Similarly, analytics can be applied for pre-scoring new business applications in a way that helps underwriters prioritize which applications they need to work on first, based on several parameters including completeness, nature of risk, and premium amount. An analytics business application like this will allow underwriters to prioritize high-value cases over others and improve their productivity overall.
When it comes to underwriting, the idea is for underwriters to adopt automation as much as possible so they have time to focus on the core of underwriting while improving underwriting margins, loss ratios, and time to quote. The most critical consideration is finding underwriters the time they need to focus on customer experience and building long-term relationships with their customers. Robots, despite their efficiency, won’t ever be able to build long-term relationships with customers. In an increasingly crowded and commoditized marketplace, customer service will be a key differentiator when it comes to winning new business and retaining existing customers.