Pain points in underwriting practices and way forward
Guest post by
Joydeep Dey, Associate Consultant - Oracle Insurance COE, Oracle Practice, Enterprise Solutions, Infosys Technologies Ltd.
Underwriting is the process of examining and then accepting or rejecting Insurable risk at an appropriate premium. The premium amount depends on type of risk being covered, historical data, actuarial calculations and local regulations. If the insurance company is too conservative in choosing the risk or demands high price for risk coverage then they lose to competition whereas if they are too aggressive to acquire market share or become liberal in risk pricing they may end up paying higher claims. Hence underwriting is a specialized task which is done by a chosen few in each insurance company.
Underwriters decide whether the risk can be taken and if so under what terms. They verify parameters which decides premium, adjust the final premium amount, modify terms of contract and write the policy. Due to criticality and complexity of the task underwriters are highly valued and costly resource in any insurance company.
Because of criticality and cost associated with the underwriting process, more and more companies are opting for Information Technology based solutions for their underwriting process. These software solutions will not only help in reducing the underwriting cost but will also make the underwriting process more efficient. Some of the other key reasons for using the underwriting software are:
- Shortage of skilled man power, which can be a bottleneck for growing business.
- Higher operational cost & discrepancies associated with manual underwriting.
- Reducing the overall underwriting time for more complex insurance product.
- Managing multiple lines of business with numerous optional features and rider
- Reacting to market change and providing On Demand insurance by developing customized products quickly.
- Ensuring regulatory compliances.
- Need to provide agency quick quote even for complex customized proposals
- Achieving further cost reduction by off-shoring some of the underwriting processes which may not be possible in manual underwriting environment.
Apart from above mentioned points, underwriting software based solution also offer the following advantages
- Better data capturing which gives actuarial insight in long term.
- Classify customer based of claim experience and profile value using statistical analysis techniques like factoring, clustering.
- Reduction in adverse selection and hence improve claim ratio.
Some of the desired technical features which should be considered while identifying the appropriate underwriting software are
- Easy integration with existing policy administration system and workflow system
- Easy to use and gives features of graphical programming so that end-users like actuary, underwriters can configure new rating rules.
- Report generation, Batch rating and scenario analysis capability.
- Scalable and robust
Oracle's Insbridge Rating and Underwriting is one of the established software in the current market and it supports P&C, Life, Health and Disability Carriers. Insbridge can be integrated with Oracle Policy Admin or any other IT system using web services. Its Web 2.0 graphical user interface provides intuitive programming feature whereas its report generation capability are streamlined for many of insurance carrier needs. Scenario and Pricing Manager components of Insbridge give sensitivity analysis of pricing based on different rating parameter and generate different scenarios. Insbridge can be deployed on any major database or application server.
Please post your comment on this blog regarding features of Insbridge Rating and Underwriting and how it propels insurance carriers to obtain full benefit of underwriting automation.
