Insurance Underwriting: Transformation Myths and Improvement Strategies

Blog: Insurance Support World - Blog

For decades, underwriting has been seen as another insurance back-office process; moreover, decision-makers often overlooked its significance and influence on the overall business. Although a fraction of total operating cost is spent on underwriting, there is a need to transform it considering its potential to lower the cost of claims. Additionally, life today is very uncertain, at this time, insurers need to focus on improving underwriting in the best manner possible.

While underwriting transformation is becoming the need of the hour, several associated myths are confusing insurance business owners. In this article, we will bust some of the common myths, discuss how to improve underwriting and claims processes efficiently, and share how insurers can step further toward making a better future. Let’s begin.

Common Insurance Underwriting Transformation Myths

1. Replacing legacy systems is necessary

To date, many insurance businesses use traditional systems to manage policies. These dated systems contain crucial databases that include information related to risks, premium, reinsurance, finances, etc.

These platforms might not be as fast and comprehensive as the latest insurance software, but that doesn’t mean they need to be replaced. It is a common myth that insurers have to replace legacy systems (that are often blamed for hampering operating efficiency) with new ones in order to transform the underwriting process.

2. Prioritizing underwriter’s expertise over the importance of process

Insurers want underwriters to be holding excellent product knowledge, sound technical skills, and the ability to collaboratively work with leaders, all that to drive desired results by balancing risk and premium pricing.

However, many insurers do not realize that while they depend upon their underwriters’ skills and expertise for better pricing, more and faster distribution, a lot of what they do depends upon the entire process.

The need to depend upon underwriters while neglecting the importance of improving the underwriting process is a misconception.

3. Changing processes is costly

Insurers are aware that policy-related procedures are lengthy as involving time-consuming tasks from collecting information to issuing the final policy. Despite knowing about the operations that need an overhaul, many of them avoid doing that as they find it costly.

Whereas, it isn’t. A thorough examination of processes can help discover weaknesses and strengths, according to which they can be redesigned. Another solution here is to outsource insurance underwriting services, cost-effectively enabling process optimization.

There’s a misconception that process changes are expensive, keeping several insurance businesses continue following existing workflow setups.

Leaving these myths behind, let’s discuss how you can bring transformative improvements in underwriting and relevant processes, which starts with;

4. Understanding Process Fundamentals

As an insurance business owner, you might already comprehend your processes but are you aware of what your staff is doing with it?

Are they even properly following the process?

Is there any need to make changes to workflow to improve efficiency?

By taking an intelligent approach to underwriting transformation, you can increase efficiencies and enhance customer experience. Here are a few ways you can follow for the same.

Strategies to Improve Underwriting & Claims Processes

1. Speed up data validation

The underwriting process consumes a large amount of time as it requires substantial details of policyholders, for instance, income and financial condition, and in the case of commercial insurance, details would be more like debt, assets, business partnerships, etc. All this information (that is already in abundance) needs to be verified and entered into the systems (mostly manually) before deciding on a premium or issuing a policy.

According to a report – around 20% of data collected from customers and agents was inaccurate. – Source

In the most common instances, these inaccuracies slip into the data due to human error or mistake. That’s where insurers need to tap on some small automation- or AI-powered systems that can help a lot. Reminding again, there’s no need to replace legacy systems, you can simply add a few new tools to complete the underwriting process smartly and faster.

For example, after capturing data, validating it using a reliable data validation tool, your underwriters can prevent errors, having precise data that can quickly fill up the forms, speeding up the entire process.

Shorter TATs in underwriting benefit insurers as well as customers; policyholders will experience a smooth, highly-satisfactory customer journey while insurers will issue more policies in less time.

2. Focus on risk assessment

Consider data an asset you can use to make underwriting more efficient. Here’s how! While using data, your underwriters should have an eye for detail during examining risks.

Additionally, many insurers are acquiring third-party support for data; for example, an external firm can provide you with genuine data on a high-risk prospect needing additional assessment before quoting the cost of a policy. You can then simply examine risks and add tags such as the prospect’s risk score.

Upon finding a low-risk score, the case can be taken further to pricing. This saves you time and money that you might otherwise spend on capturing and analyzing in-depth reports. This also minimizes human interaction, from information collection to policy issuance.

3. Be prepared for claims payout in advance

By taking a proactive approach to handling claims, you can examine past customer behaviors and demands, how these two changes over time so that to predict what future customers might be expecting. For this, you can examine data using analytics powered by technologies such as AI or machine learning.

This can be very helpful in determining an estimated amount you would be paying for claims. For instance, using predictive analytics to assess past claims can give valuable insights like how often you need to pay out claims, how much an average claim would cost, and similar. This enables you to be prepared for claims payout in advance as you get an idea of total spending on claims processing.

Taking this proactive approach can also help manage costs so that in a worst-case scenario, you need not seek help from a reinsurer or bank for a loan. Knowing things in advance helps you keep the required capital in reserve for the time of claims payout.

The changes, or to be precise – improvements discussed above should be flexible and altered according to the changing aspects of the industry, such as customer expectations, economical needs, growing competition, etc. Considering this, it is advised to monitor these improvements from time to time and ensure their effectiveness in the most possible manner.

How Does Insurance Support World Help Insurers with Underwriting?

At Insurance Support World (ISW), our insurance back-office outsourcing services are designed to address our clients’ process-related challenges and crucial operational requirements. We help insurers redesign operation models and optimize processes, enabling them to drive value and strive to thrive.

Leveraging our qualified, skilled, and professionally trained insurance experts, insurers can better manage their processes, improve functionality, increase capacity, and enhance the overall business performance. Our insurance process management solutions can be customized according to client needs, optimizing their technology systems to be used to the fullest.

As an insurance business aspect – underwriting has not been an area of focus and historically, several insurers have been dealing with issues like, excessive paperwork, repetitive tasks, shortage of resources, and to name a few. If you are also experiencing the same or similar issues, ISW’s underwriting and policy administration services are designed for you. We leave no stone unturned when it comes to delivering outstanding support to your underwriters.

Know how we can help optimize your underwriting and associated processes cost-efficiently; learn about our services and pricing plans. Call us at +1 646 688 2821 or send an email at info@insurancesupportworld.com.

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