Underwriting
ing, while another 27% see technology as increasing the turnaround times of underwriters.
Rather than occurring in an all-or-nothing
fashion, underwriting automation is evolving along
a spectrum, according to Deb Smallwood, founder
of SMA. Highly automated “no-touch underwriting,” tied to straight-through processing (STP), is
suitable for processing of standard personal lines
policies and small, simple commercial business.
Low-touch underwriting, on the other hand, employs tools to assist in a management and tracking
and providing data and insights to help the underwriter make a more informed decision, especially
for handling exceptions that are kicked out of STP.
In high-touch underwriting, meanwhile, while
automation may play a role in the workflow, the
underwriter is directly involved in the evaluation,
negotiation and pricing of the risk.
Insurance executives agree that while deep
automation for underwriting may work for some
carriers, it won’t work for everybody. Even P&C
lines have different thresholds for
what can be effectively underwritten
in an automation fashion, says Jim
Korcykoski, SVP and CIO of Nation-
wide Insurance. For example, he il-
lustrates, “the most STP that we can
implement is in the auto product
line, followed by homeowners and
third in commercial. We see percent-
ages in the 90% range in the auto
side. But on the property side, it’s
not going to be as high, because the
probability that you will need to ex-
ecute an inspection to get additional
information about the property is
Commercial lines are the most
difficult to apply underwriting auto-
mation due to complexity, Korcykoski continues.
“When you’re insuring commercial properties,
you have a lot of variability that you can run
across. There’s the ‘main street’ stuff, such as
company autos and storefronts. But underwriting
is more complex for high-end properties such as
restaurants.”
The Insurance Corporation of British Columbia
(ICBC), a P&C carrier, has also achieved a high
rate of automation with its personal lines. “Our
personal lines is about 95% STP,” says Kellee Irwin,
BBM, FCIP, CRM, VP of personal insurance for
ICBC. “It’s about having the right products and
pricing and eligibility rules and criteria. But we’re
really focused on STP, taking the approach that we
want to manage the exceptions as exceptions, and
not let exceptions manage the process.”
Irwin adds that ICBC is now focusing on bring-
ing greater automation to its commercial lines as
well. “For the policies that are not straight-through
processing, we want to improve our exception
underwriting to make it more automated. Because
right now it’s very manual for us. But, we’ll always
see some more touch in commercial lines than in
personal lines.”
Other than P&C?
Other types of insurance products, such as workers’ comp and life insurance, are more difficult to
underwrite. Geoff Banta, president and COO of
Amerisafe, says such “template underwriting” may
work where underwriting processes are simple,
such as some areas of personal lines. “You gather
some data, you put it through a scoring system,”
he explains. But in the case of Amerisafe, which
handles workers’ compensation for risky professions such as logging, human judgment will always
be required in the transaction. “Our business is
way too complex for template underwriting,”
Banta says. “We want an experienced underwriter,
“You can’t program
underwriting—it
would be impos-
sible to put all
of the brains
and expertise of
an underwriter
into a system.”
-Chris Chartrand
Genworth Financial
and it takes eight to 12 years to become an under-
writer in our company. Our underwriters need to
make the ultimate decision, not a scoring system.”
In some cases, underwriting and IT managers
are discovering that too much automation may even
hold back business. “You can’t program underwrit-
ing—it would be impossible to put all the brains and
expertise of an underwriter into a system,” says Chris
Chartrand, SVP for technology solutions at Genworth.
“We really need to have somebody who could take a
much more holistic look at an individual, and be able
to take into all the factors.” For example, Chartrand
relates, a potential policyholder with a high choles-
terol level—who would be pigeonholed into a higher-
risk bracket by an automated system—may have other
healthy lifestyle factors, such as being an avid runner.
Nationwide’s Korcykoski even has a name for
this value-added element: “underwriter curiosity.”
It takes trained professionals to examine data from
numerous sources—both internal as well as exter-
nal—to assess a policyholder’s risk.
