We are in the midst of a new age of underwriting—an age driven by technology. And the technology-driven era is not only changing the way underwriters work, but it is also transforming the underwriting discipline itself.

Executive Summary

Opinion: Technology is transforming the underwriting discipline, according to John Belizaire, CEO of FirstBest Systems, who details the potential benefits of underwriting workstations, not the least of which is allowing underwriters to take on the roles of account managers and customer advocates. The article also details loss ratio and submission ratio impacts based on Novarica research and individual FirstBest customer analysis.

It is an era of both evolution and revolution.

Futuristic Technology Abstract Stripe Background Design With LigAdvanced underwriting workstations are breaking ground in helping to streamline workflows, increase consistency, and improve overall efficiency in the end-to-end risk evaluation process of insurers, and particularly for specialty and commercial mid-market writers who typically address complex risks. Dedicated underwriting workstations are also revolutionizing how underwriting teams interact with agents and brokers, creating a collaborative environment where underwriters have a greater impact on the amount and quality of business insurers write.

“The element that distinguishes revolution from evolution is not just that technology is improving what underwriters do, but really that technology is changing what they do,” Novarica President and CEO Matthew Josefowicz noted recently. “New technology is allowing underwriters to spend more of their time building and strengthening relationships in the field and, in many cases, acting as the frontline interface of the company with the marketplace.”

Technology is not just improving what underwriters do. It is really changing what they do, Novarica President and CEO Matthew Josefowicz said.
Modern underwriting technology, and dedicated underwriting workstations, give underwriters the ability to collaborate with producers to rapidly close business. Agent portals, enhanced communication, and real-time visibility into the underwriting process help agents and underwriters work together. Decisions are made more quickly, and agents get their pricing sooner. Agents enjoy an ease of doing business that leads to more business and can establish an insurer as the “carrier of choice.”

Underwriting workstations are empowering underwriters to become more visible and active participants in the sales strategy of insurers. Brokers and agents no longer send their submissions to an anonymous company underwriting contact and wait or hope for a positive outcome. They can now work directly and in real time with proactive and responsive underwriting staff—enabled by workflow- and data-driven technology—to identify problems, complete missing information about risks and exposures, and remove obstacles that used to bog down the application process.

Many insurers have invested heavily in policy management systems, greatly improving the service policyholders receive. But those investments do not account for the functional and service gaps between underwriting and policy administration domains, which is now being bridged by the availability and implementation of state-of-the-art underwriting workstations.

According to Novarica research, more than one-third of insurers are replacing or significantly enhancing their underwriting systems in 2016 in order to enable better underwriting. As an impactful agent of change, underwriting workstations are transforming underwriters into account managers and customer advocates. But the scope and capabilities of the technology is also turning them into stronger underwriters.

That’s because the commercial and specialty lines underwriting process is characterized by intricate workflows that underwriters must master and maintain, most often manually. Underwriting workstations connect a variety of critical platforms and technologies that underwriters can rely on for quality risk assessment even for a single submission—ranging from agent portal, policy and claims systems, document management and email, to predictive models, analytics, business intelligence tools, and a variety of data services.

The unifying power of underwriting workstations thus helps to simplify the work of underwriters—by consolidating the tasks of producer collaboration, data collection, risk evaluation, account management, and reporting. For example, underwriters can leverage workstations to integrate third-party data (such as peril and catastrophe data) and internal information (from policy and claims systems) to prequalify property risks and ensure they meet risk appetites.

Sophisticated programs for analyzing data allow underwriters to better understand risks, more accurately price them, and better identify risks to avoid. Modern underwriting workstations are creating a technological bridge to legacy systems and to policy and other systems, automating manual processes, and eliminating duplicate input of information. They enable rules-based underwriting, which helps drive consistency across the organization. And they give underwriters both portfolio-level and detailed risk visibility.

Today’s underwriting workstations are built to accommodate varied and evolving data sources including a wide variety of commercial, environmental, and government data on geo-locations/aerial imagery, property characteristics, as well as supply chain, business performance, telematics, weather, and hazard information. As a result, underwriting teams can spend significantly less time assembling information from disparate sources to make even the most basic risk decisions. Additionally, underwriting workstations help to filter out the distractions of incorrect or superfluous data. So underwriters can evaluate risk with much greater precision; and they can make informed decisions about exposures based on relevant and contextual risk information.

Unencumbered by the heavy challenge of collecting data, underwriters have much more focus to actually evaluate risks. And as processes and data analysis become more automated, underwriters can devote more of their time to relationship management, working closely with producers to quote and close more business that meets the company’s risk tolerance.

Most legacy policy administration systems (and particularly those supporting complex specialty and commercial risks) are not designed to incorporate, consume, or exploit the explosion of data sources for underwriting decision-making. So the data analytics capabilities of modern underwriting workstations offer insurers a much greater range of decision-making agility and insight.

Nor do policy administration systems provide deep underwriting functionality because they are, by nature, not workflow oriented in the same way as underwriting systems. On the other hand, underwriting workstations are designed to integrate and work concurrently with policy administration platforms—to present a seamless account-based underwriting experience for the insurance enterprise.

Property/casualty insurers of all sizes—and specialty or mid-market commercial writers in particular—are increasingly seeing investments in underwriting technology as a competitive advantage. Those that have successfully integrated underwriting workstations with their policy administration and other systems, are realizing improved risk assessment paybacks, straight-through-processing efficiencies, and faster turnarounds for submissions and quotes. They can close more business, often without increasing their underwriting resources.

25% of workers comp providers surveyed in 2014 by Novarica said they were using analytics and automation in the risk assessment area–and seeing loss ratios drop by 6 points on average.
Among the key findings of a December 2014 report titled Property & Casualty Underwriting Capabilities Maturity Model and Benchmarking,” Novarica noted that across all sectors, carriers that have automated the underwriting process show a lower loss ratio on average than those that are manually underwriting. Almost 15 percent of middle market commercial respondents surveyed by Novarica are systematically underwriting using analytics and business rules and are getting a 2-point lower loss ratio than those that don’t. And 25 percent of workers comp providers surveyed are using analytics and automation in the risk assessment area and are getting a 6 point lower loss ratio.

Some of our company’s clients using underwriting workstations report:

  • Loss ratio declines/improvements of 2 points on average for specific lines of business.
  • 40 percent increase in policy counts.
  • 10-12 percent increase in hit ratios.
  • 30 percent additional premium from a new market segment.

For insurers, especially those in commercial mid-market and specialty lines, investments in underwriting technology are fast becoming an imperative. In fact, those that don’t invest in technology-driven underwriting may find themselves falling farther behind because the analytic capabilities of underwriting workstations can accommodate better pricing. And insurers with underwriting workstations that are fully integrated with a policy management system can process quotes and close good business faster than those relying on manual processes. Underwriting workstations offer operational efficiencies that can speed the submission and renewal processes; and they deliver collaboration tools that create seamless handoffs between distributors and underwriters.

Based on our customer experience, examples of workflow improvements and efficiency gains achieved by workers compensation and specialty insurers with underwriting workstations include:

  • Less manual keying of submission information. (See related article, “Executive View: Underwriting Tech Drives Service for Agents, Customers,” for Stonetrust Commercial SVP Michael Dileo’s report on improvements his company realized.)
  • 80 percent reduction in rekeying tasks in the overall underwriting process.
  • 25-40 percent productivity gains for underwriters.
  • 40 percent improvements in underwriting efficiency and decision times.
  • 50 percent decrease in submission turnaround times.

Strong underwriting has always been a cornerstone of a successful insurance business, but many insurers are now looking to underwriting as a differentiator in an ever more competitive market. While the practice of underwriting is often considered to be more of an art than a science, it is difficult to ignore the consistencies, operational efficiencies, business scalability, and financial benefits of underwriting technology to support the expertise of underwriters.

Driven by technology and contextual data, the interrelated evolution and revolution of underwriting is well underway. Underwriting workstations are transforming the underwriting discipline and propelling growth, profitability, and improved customer engagement. Indeed, as the new age of underwriting unfolds, dedicated underwriting technology is becoming a competitive and strategic necessity.