Wide Automation in Underwriting Helps Personal Lines Insurers Most: Celent

Personal lines insurers are most likely to benefit from wide uses of automation in underwriting, a new report has found.

“They are more likely to have a homogenous book of business and a standardized product set,” the Celent/Oliver Wyman industry survey found. “Benefits were most likely to be seen by [personal lines] carriers that were investing in automation for those areas associated with operational efficiency followed by underwriting insights.”

Beyond personal lines, the survey points to a number of areas of property/casualty insurance where the technology has worked best, and been used the most so far. What’s more, the document concludes that the technology makes a difference in many ways, but its success can vary depending on how it is put to work, and the line in which its used.

“Automation of underwriting processes carries the promise of improved results, but can come at a significant cost – both the hard costs (purchasing technology, implementing technology and changing processes) and the soft costs,” the report explains.

Among the key findings:

• Personal lines carriers that use a high level of automation in underwriting generate a loss ratio that’s 9.6 points better than carriers using low levels of automation.

• Personal lines carriers tend to use high levels of automation in the front-end processes relating to automated quotes, issue and renewals. In this situation, policyholders also get automated communications.

• Commercial lines carriers use more automation for back end situations such as workflow, product management, rating and reporting/analytics.

• Automation is used less among workers compensation and specialty carriers. But both sectors can generate much better results if the use the technology for service and analytics functions.

• Commercial and specialty lines carriers gained most from using intense automation for underwriting insights. Companies that used both automation and human contact in these areas had the best combined ratios.

• Workers compensation and specialty carriers were least likely to be benefit from high levels of automation, save for underwriting insights. In general, these sectors saw better results using medium or even lower levels of automation, because “these books of highly heterogeneous businesses often lend themselves to more human intervention in the decision-making process.”

The data comes from members of the Celent Research Panel, a group of senior insurance IT executives. Forty participating carriers responded to an online survey in March 2016, representing personal, commercial, specialty and workers compensation lines. More than 73 percent were midsize carriers, and 20 percent were small carriers. The rest were large carriers.

Source: Celent/Oliver Wyman