Decision Management and Insurance – Apply Smarts to Underwriting

Copyright © 2011 http://jtonedm.com James Taylor

Copyright © 2011 http://jtonedm.com James Taylor

When companies use Decision Management to put data and analytics to work in underwriting, the results are dramatic. For example, one insurance company with about 750,000 policies implemented Decision Management and risk-based underwriting for use across its channels. The company achieved an 8-point reduction in combined ratio in its first year. This was the result of improved risk management (flexible business rules and inclusion of more predictive analytics supported more tiers and finer grained decisioning).   Such a reduction is a big deal for an insurance company because it essentially represents eight percentage points of additional profitability.

Decision Management also reduced the insurer’s costs by increasing straight-through processing (minimizing the need for manual reviews) and so focusing resources on high value manual reviews, and putting underwriters and actuaries in charge of the business rules behind the decision, eliminating or reducing many IT costs. Decision Management It increased the efficiency of new business/underwriting systems for agents and enabled staff to focus less on helping agents to complete transactions and more on improving the book of business and channel productivity.

Even more important for this insurer’s present and future success, Decision Management extended true strategic control over underwriting decisions. A clear relationship now exists between the executive level, where analytic insights are guiding business strategy, and the operational level, where analytic insights are helping the company achieve its strategy every day, customer transaction by customer transaction.

“Smart underwriting is receiving a bigger share of funding for analytics in many insurance enterprises because it is the core of risk decision making.”  Kevin B Thompson ISO Review

Next, the challenges of legacy.