Introduce rules-based automation and straight-through processing to capitalise on new distribution channels

In a hardening market, the ability to make every area of the business work as hard as possible is essential. Finding efficiencies in the underwriting process includes making sure underwriters aren’t wasting time pursuing risks that are not in-appetite, or likely to cause a disproportionate loss in the event of claim.

However, with the range of risks growing every day, a reluctance to review unfamiliar submissions may mean losing out on potential sales.

At Intelligent Insurer’s Underwriting Innovation Europe virtual event on June 30, Tony Dingemanse, chief innovation officer at Dutch insurtech RISK will discuss how low and no-touch approaches can improve customer experience as well as help carriers maintain a good overall risk profile. The session is sponsored by one of RISK’s technology partners, FRISS.

Here, Ruud van Gerwen, FRISS’s head of global marketing, and Dingemanse explain how automation is a vital tool when it comes to improving underwriting effectiveness and growing profits.

Why is it important for carriers to introduce digitisation into their underwriting process?
Tony Dingemanse: Many insurers are struggling with their underwriting process and system. Due the fact they have a lot of legacy, they are not able to get the right customer at the right moment via the right distribution channel in their portfolio.

Ruud van Gerwen: Most carriers don’t realise that if they don’t do anything about the risks they are letting into their portfolio, they will have problems further down the line. If they don’t analyse the risks well enough in advance, it backfires in terms of claims.

The manual—or human—process is also inconsistent. I might accept something that another underwriter is inclined to deny.

This is a difficult decision to make, especially when customers want to have policy coverage the minute they request it, and not wait for a lengthy analysis. Automation can check for that risk.

What are the advantages of automation?
Dingemanse: We believe that a straight-through processing approach helps our customers. In a couple of seconds, we can inform our customers whether they are accepted or not. This means that they don’t have to wait for hours even days to find out if they can be insured.

van Gerwen: It’s like having a colleague that is always on duty. There is unbiased screening of every policy—they are all treated the same way and the system gets smarter with every policy it analyses because of the artificial intelligence component.

Equally, every decision that is made is explainable—ultimately the underwriter has to explain a decision to the customer, particularly if their policy is flagged as high risk.

Are policies turned down outright?
van Gerwen: In the FRISS system, points are allocated for every aspect of the risk. Higher points are allocated to something that may be a higher risk. It never outright says a risk should not be covered, simply that a higher score is given.

The insurer can take this score and fine-tune it to match its appetite. This means there is potential for a human element of the process. A low score (in FRISS terms typically under 50 points) could well go straight through.

Higher scores might mean an underwriter asks for certain parts of the risk to be excluded for the policy, or for the customer to take action to improve an element of that risk.

Dingemanse: Due to the straight-through processing, we’re able to use the 80:20 business rule: 80 percent of the recurrent work can be done automatically, the other 20 percent has to be done by our underwriting experts. It’s also the portion of risk they are most keen to explore.

van Gerwen: Overall, carriers should look at a system like this to grow their business and introduce more products to the market. You need these products to be successful in what is now a highly competitive marketplace.

There are so many technology solutions available to carriers, how easy is it to onboard something like this?
van Gerwen: This is a process that can be integrated in whatever solution they are already using. It’s simply presented as a score on a screen the underwriter is used to seeing already.

There is some work to be done in terms of integration by the customer, but FRISS is fully software-as-a-service so needs only a couple of people from IT to onboard.

A key element that should not be forgotten is that the underwriting process also needs to change. The solution should be an integral part of the way the insurer runs the business.

Concerns have been that insurers generally say they don’t have time for more technology right now, often because they are already in the process of changing their core systems. However, without it, they are already potentially losing money.

Dingemanse: The main challenge of onboarding this technology is looking at the costs before the company is able to see the results. However, we have an insurtech-minded board, so in our case it wasn’t that difficult.

Tony Dingemanse will be speaking on Wednesday June 30 at Intelligent Insurer’s Underwriting Innovation Europe Virtual Event (June 28–30, 2021). The event is free to attend for insurers and brokers/agents, but you must register in advance. Sign up to access the content live and on demand here.