Underwriting excellence is paramount for insurance companies to enhance overall business performance. Moreover, it is necessary to review how you can establish an alignment or a superb synchronization between underwriting and policy administration processes. However, underwriting improvements somehow depend upon your company’s culture and needs. For example, some insurance companies would shift their resources from other areas to underwriting, while some would get external support.
You can also take wise steps according to your needs, identify process-related issues and find solutions to rectify them, making valuable sense for your company. But before discussing how to improve underwriting, let’s look at some factors that influence it.
Factors Influencing Underwriting
There’s no one formula for obtaining underwriting success. Since underwriting operations and processes usually vary according to the industry, geographic region, product, client type, size, etc. All these factors influence how you manage to underwrite or improve it. For example, if you are handling the coverage needs of SMEs, you may follow a standard underwriting process or maybe simplify it using automation to attain excellence.
On the other hand, large enterprises typically have needs for a more bespoke coverage; for these clients, you might go through comprehensive risk assessment and selection, more prudent coverage design, etc. Therefore, consider all these and other relevant factors before beginning with underwriting improvement and know that excellence lies within its core.
3 Steps to Improve Underwriting Cores
1. Access Third-party Data Sources
In this fast-changing world, new data is being generated every further minute. As an insurer, you can explore third-party data sources to gain more information and utilize it for underwriting improvement.
When it comes to leveraging external data, you need to ensure it is of the quality you need or make it qualitative. To organize data acquired from third parties, you may need to use centralized data hubs, which can help you synthesize external data.
To make the best out of it, you need to have a combined solution that includes multiple data providers, artificial intelligence, and the involvement of intelligent, skilled insurance professionals.
2. Increase STP Rate
To improve the profitability of your insurance business, consider increasing STP rates without losing sophistication in underwriting. If we look into the history of insurance, carriers have relied upon various complex rules that require human intervention, making STP rates between 50% and 60%.
To reach the ideal STP rate (close to 90%), you can reassess and alter some rigid rules, converting them into simple ones. Apart from that, if you get deep into processing, you will find some rules that are not needed anymore. There’s a lot beyond limitations in underwriting, and things can be better positioned to improve its cores.
3. Utilize Technology
Underwriting can be improved using innovative technologies with data sources we discussed in the first point. This can help you obtain higher efficiency and greater agility in underwriting. In addition, technology can help automate repetitive, manual, and error-prone tasks that consume a large part of your underwriter’s time. This saved time can be better utilized in other crucial areas.
Instead of relocating human resources from other departments to underwriting and policy admin, you can use advanced technology tools like robotic process automation, optical character recognition, natural language understanding/processing, etc. Doing this can streamline the underwriting workflow and strengthen its cores, allowing underwriters to use their skills more effectively.
While you take actions to strengthen underwriting cores, reassure yourself of the capability of the entire process.
Tips to Improve the Underwriting Process & Obtain Underwriting Excellence
1. Increase Data Accuracy
Acquiring data in bulk is fine, but what would you do with the data if you are unsure of its precision? The records of customers or potential customers are not always correct, even if you generate data internally. Therefore, you need to make sure (regardless of the source) the data you obtain must be reviewed and filtered to have an accurate data set.
2. Organize Data Hierarchically
Insurers need actual data, which is even widely available at different levels. Although the size of this data is considerably huge, underwriters only use some data at a time. Which means they need to use some part of the data according to their requirement.
To speed up this process (which includes refining helpful information out of unorganized data in abundance), you can organize the data in a hierarchical structure, for example, labeling data parts with categories.
3. Ensure Consistency in Analytical Areas
Legacy insurance operating models are complex, creating several bottlenecks in the underwriting process. The underwriter takes their own time to complete a policy while dealing with various complexities. One of the best solutions is improving analytical areas and syncing them with final data sets.
Doing this will integrate processes and streamline underwriting workflow. What’s more important here is the consistency you need to establish to ensure all models generate the same expected results, better data and analytics usage, and compliance.
4. Gain Data Processing & Management Capabilities
According to McKinsey, 30 to 40% of an underwriter’s time is spent on administrative tasks like re-entering data or performing analyses manually.
Consider using a master data management tool that can help reduce the processing needs and time using a policy management platform. The specific policy platform stores information related to active policies, details of policyholders, etc.
On the contrary, the master data management platform will have all the internal and external data. For example, it stores the information related to current policies and those that are no longer active, details on claims, etc.
How can Insurance Support World help with Underwriting?
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