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Commercial Lines Underwriters the Multi-Taskers of Insurance

Robert Regis Hyle | August 11, 2014

Is the commercial lines arena the last great frontier for underwriting? Commercial lines has been the domain of carriers that has remained resistant to change and the feeling that automation and business rules can’t overwhelm what an underwriter does, according to Gail McGiffin, a former underwriter herself and now partner/principal insurance advisory, global lead, Underwriting, product & policy solutions for Ernst & Young.

McGiffin believes it’s important to look to technology to guide the underwriters rather than replace them, but she understands why it has taken so long to embrace that view.

“The advent of an underwriting work station is still a maturing software area,” she says. “That is an important area to support the underwriter in a more guided way. You won’t put all the decisions in a rules engine; it’ll be an assisted model.”

The combination of viewing technology as a replacement for the underwriter as opposed to an enablement, coupled with maturing vendor solutions, has brought a convergence to the industry and McGiffin believes over the next few years, larger carriers will study their IT budgets to find ways to support underwriting work stations.

“We are finally going to see advances in the front office to help middle market and specialty underwriting,” she claims.

McGiffin maintains such attention has more to do with the complexity of risk rather than the size of the carrier. As commercial lines carriers move into the middle market, large, and specialty lines, the complexity of the exposures and the products being sold create more of a challenge for technologists to enable those processes than it does for personal lines or small commercial lines. This is based on the amount of data collected, the number of rules, and the processes involved, according to McGiffin.

“There’s no question that with Progressive leading the charge in data mining, the science of rules automation and modeling has advanced over the last 20 years,” she says. “Commercial lines have seen advancements, but not where the higher-level thinking of an underwriter is out of the equation. There will still be a role for the underwriter to apply the rules from their experience. It’s less about the size of the carriers and more about the complexity of the business, the dimension that needs to be addressed, and the technology.”

Underwriters as Sales Execs

Insurance people normally think of underwriters as analytical types, particularly in the commercial lines space, but McGiffin points out that if you examine how the business is written, the underwriter usually owns the relationship with agents and brokers and that puts them in a sales capacity. She believes sales skills need to be emphasized along with relationship building, the ability to pursue business and close the deal, and become as much a part of the deal as possible.

“The underwriter own the new business pipeline,” she says. “A commercial lines underwriter would say they have a relationship with agents and brokers, but translating that to sales skills is something the commercial side of the business has not advanced. Personal lines made that transition a long time ago. Even using the word “sales” is a bit of a change when you think about commercial underwriting, but it is an important change when you discuss the overall account service equation.”

The term “decision scientist” suggests more data, which can bombard the underwriter, but McGiffin doesn’t think that is the important change.

“It’s about using technology and applying rules to the data, synthesize it, and assist the underwriter in their analytical focus,” she says. “People talk about Big Data, but the concern I have is bringing in more data without the ability to store, assimilate, synthesize, and leverage technology to apply rules to the data and serve up key events, patterns in the data, and assist the underwriters with their analytics.”

Big Data can overwhelm the underwriters, explains McGiffin. There is science that is supported by rules-based analytical capabilities so it’s not just the underwriter analyzing the data, but rules-based technology assists the underwriter in the analysis of patterns and what is happening with the rules being executed.

Customer Advocate

More commercial lines underwriters acknowledge they quarterback the account and must take on the responsibility of customer advocate. McGiffin points out that means more than just servicing the policy, but coordinating value-added services and delivering on the promise of the contract.

“It’s the underwriter’s role to be central to that for the agent, brokers, and end customers,” she says. “If you think about the role technology can play with a continuous flow of collaboration and updates on the account across the life cycle, the underwriter is better equipped for an ongoing service role. Integration enables a more intimate knowledge of the account and the opportunity to anticipate service needs and not just react to events.”

Freedom to Decide

McGiffin concedes there is still plenty of “art” to the task of underwriting, but it is art that is based on a more scientific foundation.

“It’s not simply intuition, it’s grounded in statistical data to validate that the risk is similar to others. You are applying art to the context of a more scientific foundation.”

The art involves levels of intuition based on experience where underwriters can analyze a risk and make a decision that is based on historical data and is grounded in the experiential element of that individual.

“That is worth something,” says McGiffin. “It’s the higher level thinking that you are paying the underwriter to do their job. There will always be an art element, but that is applied in the context of a much greater fact base delivered through better technology. The balance of art and science is what the commercial lines need to achieve and technology and data play a big role.”

Underwriter as Innovator

Product development tends to be a home office activity and this is another frontier that needs change because underwriters are in the marketplace serving accounts, and assisting agents and brokers. Underwriters need to be well-versed in the territory and be aware of the legal and regulatory environment so they can channel that information in terms of product innovation.

“The connective tissue between the field and the home office needs to be better and being in the market is critical to the repeatable innovation,” says McGiffin. “Innovation can be at the point of sale but this is looking beyond that as a strategic part to what an underwriter contributes to the company.”

Insurers want creative solutions and problem solving when quoting a new account, but McGiffin points out carriers need to bring market knowledge to build a better product.

“Technology is advancing so having reusable product components to configure new offerings for a particular segment means the technology has to be there to do the work much faster and deploy the product into the market for the underwriter to sell,” says McGiffin.

 

 


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