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The Benefits of Automated Insurance Underwriting

Too many insurance companies have failed consumers the world over. Consumer expectations for simplified processes and customized services are not being met.

Insurance shoppers expect to quickly receive a personalized and affordable policy from their carriers.  

And yet, the insurance industry is lagging behind, using legacy platforms that are mired in time-draining processes. The result is a decrease in efficiency and an increase in costs.

What’s worrying is that the place where most insurance companies fail is at the very beginning — during the underwriting process. 

Many incumbent insurers are losing customers simply because they are using outdated technology.

The Underwriting Process in the Insurance Industry

Underwriting is the process of gathering a customer’s personal data and determining how much coverage to provide and at what rate. To make this decision, the underwriter looks at data, stats, and regulations. These are only some of the factors that are considered:

  • Occupation
  • Income and assets owned 
  • Health & medical conditions 
  • Family medical history 
  • Lifestyle choices

Insurance underwriters then assess the amount of risk the client brings to the insurance company and sets an appropriate price for the policy. In the case of a life insurance underwriter, for example, the aim is to get an extensive overview of the candidate's life. 

Life Insurance Underwriting

Traditionally, the life insurance agent needs to go through reams of documents with the applicant before they send the documentation to the insurance company for review. Part of the process is entering all the data into a database where it would be analyzed by an underwriter. Then, the applicant is required to undergo a medical exam. 

Once all the relevant data about the candidate's life has been collected, then the underwriter makes a decision. The whole process can take days and needless to say, is very frustrating.

The challenge insurers face today is that underwriters are often overwhelmed by the sheer amount of applications that need to be processed. As a result, insurance companies are not able to respond in a timely manner, which leaves customers frustrated and going elsewhere for coverage.  

Therefore, insurers need to find a way of streamlining underwriting processes, while strictly following regulatory requirements. 

And they need to do this quickly because tech-savvy insurtechs are using sophisticated underwriting systems to enhance their tasks and capture market share.  

Smart Technology is the Solution

Meeting customer expectations relies on optimizing underwriting systems.

So, the way forward for the insurance industry is to use automated underwriting software to bring innovation to the underwriting process. Automated underwriting creates new business processes that boost productivity. 

The Automated Insurance Underwriting Model

Automated underwriting uses advanced software instead of human underwriters to carry out underwriting processes. As a result, risk assessments are performed more accurately in a fraction of the time it currently takes.

Automation simplifies the underwriting process, leading to more consistent decisions and faster time to market. It also offers consumers a seamless signup process and competitive prices.

Automated Insurance Underwriting vs Manual Insurance Underwriting

While automated insurance underwriting efficiently calculates the risk a customer poses, manual insurance underwriting is the complete opposite. Manual insurance underwriting takes much longer to finish because it’s performed by a human underwriter. 

The underwriter has to sift through countless documents in order to calculate the risk in providing insurance to the applicant.

As a result, the entire process, which includes data aggregation and data processing, may even take days to complete.

This traditional approach to underwriting is not only time-consuming but could lead to incorrect risk assessments due to human error. 

However, that’s not to say that there isn’t room for manual underwriting. 

The Value of the Manual Underwriting System

Every client is different and there are applications that require the attention of experienced underwriters. For instance, in cases with contradictory medical data or where information is incomplete. 

While manual insurance underwriting is a necessity for unique cases, it presents a drain on insurers’ resources.

This is why insurance companies are adopting automated underwriting to quickly advance qualified candidates while leaving complex cases to human underwriters.

Benefits of Automated Insurance Underwriting

Automated underwriting platforms perform the same process as manual underwriters. However, there are several impactful advantages to using automated insurance underwriting.

Automation streamlines the first phase of the underwriting process—it assesses an application and flags elements that must be reviewed by an underwriter.  

Since there is little input from a human, automated insurance underwriting eliminates mistakes. Once the automation platform has all the correct information, it will then produce an accurate risk assessment.

There’s no fear of things like transposition errors or missing relevant data. 

Automated Underwriting For An Accelerated Process

Today's customers want a streamlined buyer's journey. And speed plays an integral role.

Automated insurance underwriting needs only a few minutes to complete a risk assessment and have it reviewed by an underwriter. In straightforward cases, the software arrives at a decision on its own.

As a result, insurers can dramatically improve their customer experience by offering immediate coverage at lower prices.

This also gives insurance companies the ability to use their resources to invest in highly personalized product development and expand into new markets. Automated systems allow human underwriters to use their expertise to develop new policies, pricing models, and discover new market segments.

In short, an automated underwriting platform makes room for insurers to focus on ways to generate additional revenue streams. This makes it one of the main drivers of sustainable growth for insurers. 

What Technology Should You Use?

Insurance companies are experimenting with new digital solutions, such as artificial intelligence and machine learning to automate their underwriting processes.  While it's understandable to look for innovation in these solutions, however, only business rules engines have a proven track record in the insurance industry. A business rules engine is a powerful software platform that uses conditional logic to automate decisions.

Insurance carriers use rules engines to embed their expertise into the underwriting procedures. As new opportunities and risks pop up, underwriters use rules engines to make the necessary adjustments on the fly.

On the other hand, innovative systems like artificial intelligence and machine learning still have blind spots that can potentially compromise underwriting services.

The Future of Automated Underwriting is Responding to New Data

Our world is in constant flux.

Typically, insurers have relied on historical data to assess risks. However, in many cases, the relevance of historical information is steadily decreasing. For example, referencing past experiences to assess natural catastrophe risks is not sufficient anymore. Climate change and rapid urbanization are only some of the factors that contribute to the emergence of new risks. The resulting adjustments to pricing and coverage can only be made by a human underwriter.

Also, insurance buyers expect products to adapt to their personal needs and circumstances, which is another reason why insurers need to make underwriting rules responsive to new data.

For example, in auto insurance, if a customer's driving improved over time, then the insurer might consider lowering the price of the policy.

In order to meet these needs and challenges, the underwriting software used must make room for future changes.

Insurers Using Automated Underwriting Technology to Offer Customer-Centric Experiences

The Boston-based insurer John Hancock developed its eApp platform, which is a life insurance underwriting solution that reduces the amount of time it takes to process applications to mere minutes! 

The platform offers instant decisions for all applicants up to 79 years of age and all face amounts. The CEO of John Hancock Insurance said in a statement that the app, "is an important step in our ongoing journey to advance our digital solutions, access new data sources, provide a better service to our customers, and, ultimately, grow our business."

The solution cuts down on time and paperwork, enabling the insurer to focus on client questions and needs.

These types of solutions are quickly going to become the norm, so insurers who want to secure their future should take note. 

What Rules-Based Automation Can Do For The Insurance Industry

Business rules engines automate complex and time-consuming tasks, allowing underwriters to focus on cases that need more research and professional expertise.

Hyperon is a business rules engine used by leading insurance carriers to boost productivity and meet customer expectations. It’s a low-code development platform that places underwriting processes in the hands of underwriting managers. There’s no need to get the IT department involved, which allows insurers to respond to changing market conditions and regulatory requirements in real-time.

Underwriting Transformation with Hyperon

So, using Hyperon to automate underwriting processes, insurance companies can:

  • Attract new clients with a quick application process that gives quotes in record time
  • Develop innovative insurance policies in real-time at competitive prices
  • Boost the productivity of their underwriters and significantly cut costs

Hyperon’s user-friendly interface gives insurance carriers a bird’s-eye view of underwriting processes, enabling collaboration from team members across the company. To further ensure that all underwriting decisions are consistent and accurate, Hyperon relies on central decision configuration. 

This means that insurers don’t have to worry about duplicate or contradictory information.

Hyperon speeds up the underwriting process while reducing costs and errors, and optimizing the customer experience. These benefits will continue to produce value moving forward.

Insurance companies that don't move away from traditional methods of underwriting risk going into a tailspin from which it might be impossible to recover — from losing customers because of slow reaction time to failure to recruit and keep skilled employees.

Hyperon integrates flexibility into the underwriting system, allowing insurers to respond in real-time to changing market conditions.

Underwriting transformation is the way for insurance providers to remain competitive in a fast-paced market. By automating routine tasks with Hyperon, insurers allow their underwriting team to bring more value to the organization.

However, switching to automation is a delicate process, and if not done professionally can significantly derail a business. That's why leading insurers rely on Hyperon to streamline their processes.

If you’d like to see how Hyperon's expert team can automate your underwriting processes, then sign up for a free trial. Hyperon is FREE for development use.

You can download it, configure it, and test out its abilities in the development environment without making any financial commitments.

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