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Transforming Underwriting

MARCH 2004

CONCLUSIONS

For a long time, it has been difficult to make much money writing personal lines insurance. The convergence and mutually reinforcing interaction of four technologies—business rules engines, predictive scores/analytics, data management, and optimization—now provide insurers with a significant opportunity to improve and transform their underwriting function.

Insurers using these technologies will gain a number of benefits, including:

  • A broader market reach made possible by a wider range of tiers

  • Being a better business partner for agents

  • More accurate pricing within tiers through the use of predictive scores

developed through analytics

  • Lower loss ratios resulting from more accurate pricing and less adverse selection

  • More rapid, consistent, and accurate underwriting decisions driven by business rules engines

  • A reduced requirement for underwriting resources to make routine accept/reject decisions, with a lower “underwriting-only” expense ratio

  • Improved speed to market and agility as business users depend less on IT groups for changes

  • An ability to transform the underwriting function from selection of individual risks to managing portfolios of risk—with the potential to improve the aggregate risk/premium relationship

The technologies offer win-win-win potential: for the customer, the agent, and the insurance company. Insurers who do not underwrite with these or similar tools will be at a long-term disadvantage.

© 2004, Celent Communications. Authorized reproduction permitted.

www.celent.com

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