Designing for the future : Successfully engaging agents, raising the bar on customer service and optimizing underwriting profit
Where are investments being made?
Insurers are attempting to navigate the current economic challenges by continuing expense reductions and outsourcing while making large investments in back-end policy systems. The industry is becoming more complex and competition is increasing both from existing players and from an abundance of capital.
A recent Accenture Underwriting Survey revealed that 90% of the industry is investing in upgrading their underwriting capabilities. It is most likely that these investments are being made to back-end policy administration systems. Interestingly, according to PwC, 50% of policy administration implementations are unable to fulfill benefit requirements and 20% fail outright.
Despite this considerable ongoing spend by companies on policy administration systems, there has been no positive movement in the loss ratio, and the expense ratios for many companies continue to deteriorate.
Where are investments needed?
Insurers must invest in digital capabilities and better utilize BIG DATA to increase their competitiveness. These investments need to provide better risk information, create meaningful analytics and increase the underwriter’s effectiveness in risk selection and satisfying client needs.
Specific attention must be paid to creating a complete view of the risks involved. Ensuring the ability to thoroughly and intelligently analyze individual insureds for specific or hidden risks, provide meaningful solutions to the producers and optimize pricing decisions in order to increase profitability. Modern policy administration systems are not facilitating data gathering, analysis and risk positioning. They are process specific. As a result, much of the “swivel” chair activity performed by an underwriter is not mitigated.
Approximately 70% of the underwriters’ time is spent on non-value add work such as searching for data, pulling it together, determining which data is meaningful and then reviewing this data. Additionally, each underwriter gathers data and works through an application differently. This creates room for errors, misinterpretation of data or incomplete research. It also delivers poor producer and customer experience.
The current underwriting process is inefficient, ineffective and soon to be obsolete.
What can be done to turn the tide for underwriting?
Although there is no single solution for the myriad of issues that face the insurance industry, leveraging digital capabilities to enhance the current underwriting and customer service paradigm and increase underwriting acumen and engagement will serve to improve risk selection and lead increased profitability.
The technology available today provides significant opportunities to simultaneously enhance customer interaction and underwriting accuracy. Unfortunately, investment in this area has been lacking.
Successfully engaging agents, raising the bar on customer service and optimizing underwriting profit is dependent on two related actions:
1. Implementing a fluid and fully integrated underwriting environment from the agent through policy issuance.
2. Using BIG DATA to analyze and present a complete picture of the of the client’s needs and associated risks.
To do this successfully, insurers must provide rich user interface that delivers better customer and business outcomes and provides continuous experience among the various channels it services.
Ideally, this will be done with applications that are inexpensive, easy to maintain and overlay the existing systems. This will mitigate the costs currently being spent on back-end systems and allow insurers to add value to their agency base and be able to grow their business profitably.
Information must be assembled quickly and seamlessly and presented to underwriters using effective and efficient tools to reduce the underwriters’ time, so they have time to help the client and improve the business results.
The approach needs to provide an auditable and consistent process that codifies historical underwriting guidelines and expertise as well sets the framework to provide superior customer service. The outcome of this approach will be to increase agent service and resulting premium, decrease loss ratio by better and more consistent use of all available data and decrease expenses by increasing efficiencies.
Our industry is undergoing tectonic change that is being pushed further and faster by abundant capital and the eruption of digital capabilities available to us. In the very near future, applications will be completed automatically from data available on the web. No human interaction will be needed. Internal data, external structured and non-structured data will be brought together to provide a complete and transparent view of every client. Intelligent companies will be able to draw correlations between potential for profitability and data that until now is seemingly unrelated. The same data will be used to create customer solutions and enhance producer and customer satisfaction.
To paraphrase Darwin, it will not be the strongest that will survive, nor the most intelligent, but the ones that adapt. As with any revolution, those in the forefront will outwit, outperform and survive in good stead. Others will lag and barely hang on. A good portion will never make the transition quickly enough.