Automating the underwriting process holds great potential, but to realise that potential you need the right product or products. There are plenty of software suppliers and plenty of decision engines out there but there is a big range of capabilities too.
Some have theoretical capability. We worked with an insurer looking to overhaul its back office and introduce on-line submission of applications with automated underwriting. Its admin software supplier said it had a decision engine too and so the insurer decided to adopt it – only the engine turned out to be a basic ‘shell’ with limited capability and nothing like the power of a well-developed tool. The back-office system works fine but the automated underwriting has yet to be implemented.
You need an engine that has been designed especially for the complex life insurance underwriting environment. But even some of those products don’t come with a rule-set or ‘knowledge base’ installed, which means that there is the big task of programming the engine with the intelligence required. You could argue that you would end up with a set of rules bespoke for your business, but the effort required far outweighs that of customising an already comprehensive knowledge base; why sweat away when the hard work could have been done for you already?
And don’t be tempted to build your own. That route might sound appealingly cost-effective but… The better engines have been invested in and developed over a number of years, and boast a range of powerful features. A self-build project is highly unlikely to be able to replicate anything like them. How about timing and speed to market? Can your IT team schedule the build you want?
And how long is it going to take? Buying in proven technology means that the new system can be up and running within a few months, with full capability from outset; the alternative is an incremental, hesitant implementation over a period of years. And don’t forget project risk and the potential for negative impact on the business: Proven tech wins hands down, and furthermore the supplier has an experienced implementation team to help smooth out any wrinkles that arise.
Ownership by the business
Finally, business software needs to be owned and managed by the business users. The best automated underwriting tools are not just managed (monitored, tweaked and maintained) by the business, but they are easy to work with: no specialist programming knowledge or skills required. Could the same be said for a ‘home-grown’ system? And for sure you don’t want to be asking the IT guys every time you want to add a rule or adjust an existing one. (They would probably say they could schedule that in in three months’ time.) At a conference we listened to a major US insurer describe how they went the self-build route. The firm was pretty pleased with what it achieved… but what it didn’t know was how much better an outcome they could have had by buying a good product from an external supplier.
Your shopping list
So what essentials should be on your engine shopping list?
Harnessing the power of data
Point number 10 is absolutely crucial. Data produced by the engine and throughout the new business process, especially when allied with in-force data as the portfolio develops, is key to understanding the efficiency of the whole on-boarding set-up, the make-up of the new business stream in terms of customers and risks, and the performance and value of individual channels and distributor partners. The results of data analysis are an essential part of the successful strategic management of the business.
So a good data analytics module is a key component of an engine, and some feature a ‘workbench’ that provides an overview of the new business pipeline, tracks progress of individual cases, monitors engine/rules performance, produces comprehensive reports and maybe directs cases to the appropriate underwriter when human involvement is required.
And given that the e-application form has a close and direct relationship with the engine, you might want to consider sourcing the customer interface software from the engine supplier, if it offers one. It is not essential that all the software driving the new business process comes from the same manufacturer, but sometimes sourcing more than one piece of kit from the same place can make life a bit simpler.
So, not all automated underwriting systems are created equal. Evaluate pros & cons and choose carefully. Ensure that you acquire the strong capability that will continue to benefit your company as it and its business grows.