Automated Underwriting systems are an attempt to reduce or remove the manual activities that have long formed part of the underwriting process. Instead of having underwriters of varying levels of experience evaluating proposals, an automated solution is designed to weed out the simpler cases. The underwriters are not removed from process entirely, but instead focus on the more complex cases, where their skills can be best applied.
Technology-wise, underwriting systems often take one of two main forms:
- Back-office, rules engine integrated with the policy admin system
- Point-of-sale integration of rule engine at proposal capture time
- A rules database. This contains the accumulated wisdom regarding symptoms, risk factors for diseases, occupations, etc. Because the database captures this type of information, in practice it often comes from a reinsurer. Rules databases will normally include standard rules about diseases, traits, pursuits, and occupations. They will also include product-specific rules, which are often configured specifically for the company's products that will be evaluated.
- Engine software. This is the relatively straight-forward software that evaluates a case (proposal), applying the rules database to determine a course of action.
In a back-office environment, the automated underwriting system is often integrated with a workflow system (although integration with the new business or policy admin system is the other approach). The workflow is usually managing a case through the New Business process, which include one or more iterations of evaluation by the underwriting system. The underwriting system will require data about the proposal, along with any existing policies the customer holds with the company (for aggregated risk calculations). In this scenario the automated underwriting system will normally respond with one of a limited set of recommendations:
- Accept ordinary rates (cleanskin)
- Decline
- Refer for manual underwriting
Point Of Sale
Over the past few years, vendors (particularly in Life) have pushed automated underwriting tools integration in the proposal capture process at Point of Sale. This makes some sense, as the tool can prompt the customer/agent through a series of underwriting questions during the capture stage. If the case is evaluated as standard, the customer and agent have the benefit of knowing that the policy should be issued quickly. Alternatively the questions/responses may indicate to the customer that further medical evaluation will be required.
For cleanskin cases this offers the possibility of achieving the Straight-Through-Processing that has been discussed over the years. With POS integration of automated underwriting, combined with workflow/automation at the back office, a cleanskin proposal could be submitted electronically, and issued with little/no manual work.
Mis-Use: some companies have been known to mis-use the automated underwriting tools, configuring "underwriting rules" that really should be handled within the New Business / Policy Admin system. For example, the maximum sum assured on a product. This really comes down to the perceived difficulty in making changes to the admin systems when compared with configuring the underwriting tools. Of course the disadvantage of this approach is that you are left with product rules spread around the systems rather than being grouped sensibly into a few maintainable locations.
Vendor Examples
SwissRe (www.swissre.com) - Magnum, supports both back-office and POS approaches.
MunichRe subsidiary - AllFinanz (www.allfinanz.com) - URE: Underwriting Rules Engine.
Insbridge (now part of Oracle), for P&C rather than Life/Pensions
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