Underwriting uses data and information from three sources: the appli- cation, external data, and internal data. Agents and customers com- plete the application. External data typically include driving records (MVR); claims records (CLUE); credit ratings/scores, property inspections, etc. For renewals, insurers can look at their own internal records for payment and claim history, and other information.
In the actual underwriting process, underwriters and/or systems assemble and review the information. They then place an application into a tier. Often an underwriting score is calculated, although varying levels of review by human underwriters also occur. The score and/or human review determine whether the application is accepted (fol- lowed by determination of the rate), rejected, or in need of further review.
While all personal lines P/C companies follow this general process, there is significant variation in how individual insurers execute. In many companies, actuaries create tiers and develop rates using pooled industry data, which may be analyzed only to the point of meeting regulatory scrutiny. Original data entry may still be on paper, with re-entry one or more times not uncommon. Some insurers or agents make case-by-case decisions to order external data; and access to internal data may be limited by siloed IT environments. Assembly of data can be a manual and iterative process, with limited quality control. Even when scores are available, half or more of the underwriting decisions may be ultimately made, or ratified, by human underwriters.
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