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.