TRANSFORMATION OF THE UNDERWRITING FUNCTION
An insurer that has implemented these technologies and finds itself with a reduced need for underwriting resources could reflexively reduce underwriting staff. However, doing so foregoes a potentially powerful benefit: an opportunity to transform the mission and function of the underwriting group from selecting individual risks to managing risk portfolios.
Historically, the job of a personal lines underwriter is to review individual auto or homeowners applications submitted by a group of agents located in a specific geographic territory. Working with field-based staff, an underwriter has only a limited ability to influence the kinds of risks that those agents submit.
Using the technologies described in this paper, an underwriter can shift focus from individual risks to a portfolio view of all submitted, accepted and rejected risks. With predictive scores and analytics, an underwriter can ask questions such as:
How does the actual distribution of applications among tiers compare to a target distribution?
If the actual distribution is far from the target, is the tier mis-priced or are agents misunderstanding the insurer’s relative appetites?
Do applications or policies tend to have or to lack certain predictive score variables. (Are there a lot, or very few, three-car policies? Do many, or few, homes have fire/burglar alarms?)
Which agents are submitting a desirable mix of business and which agents see the company as the only place to send applications with two at-fault accidents?
© 2004, Celent Communications. Authorized reproduction permitted.