How next-generation underwriters can maximise time underwriting, not processing, according to Cytora’s Richard Hartley.
Our previous blogs have focused on why underwriting productivity is the best path for insurers looking to win more profitable risks without adding additional expense.
This latest blog focuses very specifically on ‘how’ – outlining how underwriters are newly able to bind more profitable premium relative to their current baseline.
In short, risks must be filtered and prioritised to avoid scarce capacity being wasted on out-of-appetite or low value risk submissions. This two-stage process allows underwriters to focus their scarce time on high value opportunities which meet threshold criteria.
This evolves underwriters from risk processors, to value maximisers. It takes them from treating each risk as the same, to treating them as starkly different in value. Instead of asking ”How many risks can I process today?”, they ask, “Given the options we have, where should I focus my time to maximise the value created across the portfolio as a whole?”
Augment, Filter and Prioritise are technology-powered operations that insurers run on their risk intake ahead of any scarce underwriting time being expended.
It starts with the creation of a risk profile (Augment). This is then used to separate risks by their characteristics into different buckets (Filter). This then routes the risks on different paths by priority (Prioritise). And it does all this without absorbing scarce underwriting capacity. Underwriters maximise their time “underwriting not processing” and crucially allocate their time only to the risks which have the highest value.
Let’s take these in turn:
Insurers receive risks in a myriad of formats across different distribution channels. To understand whether an insurer wants the risk or not, underwriters today have to analyse the risk submission as well as do manual look-ups of other data sources (flood, fire, subsidence etc).
This absorbs precious underwriting capacity and creates an expense penalty for every risk processed – whether you want the risk or not.
Augment solves this problem by automatically creating a digital risk profile for every submission, enabling it to be treated differentially without human intervention. Importantly the format of the profile enables the risk object itself to be machine readable and granular rules to be set around it.
As a result, the risk can be treated differently according to its attractiveness, complexity, type, or relevance.
In addition, the risk profile outlives the submission. The latter is a moment-in-time snapshot of the risk, whereas the profile itself is made up of hundreds of data sources and is ever-changing. The risk profile updates when the risk exposure changes, can be viewed anywhere, synced with any system of record and shared with anyone – enabling unified engagement across the lifetime of the risk.
This minimises downstream manual data gathering, which needs to happen to see if the risk has changed after the submission has occurred.
The digital format means a lineage can also be associated with the risk revealing how it has changed, where it has moved and who has worked on it. All of this happens without expending a single minute of valuable underwriting time.
Without treating the risk differentially, process automation only increases expenses. Any gains in efficiency are offset by capacity being wasted on the wrong risks.
Typically, up to 50% of the total submissions received are outside of risk appetite. High value underwriting time is wasted on these risks which can never convert, to the detriment of converting more in-appetite high value risks.
This happens because risks are filtered via an email inbox, making it time consuming to open up each email, check the PDF, begin work on assessing whether the risks meet the risk appetite criteria – only to find that the risk is outside of appetite.
What’s more, there is no centralisation which means risks are regularly filtered first in a regional team then re-routed. They’re often then refiltered and touched multiple times by different underwriters who duplicate work.
Filter solves this problem by executing the unique risk appetite of an insurer against an incoming risk submission. It instantly classifies the risk inside or outside appetite.
Importantly, out-of-appetite risks need to be recorded, given they are a valuable source of market demand. This information can then be accessed in future, with adjustments to either risk appetite or extensions to coverage.
Once all risk submissions are within appetite, underwriting teams typically work on a first in first out basis. This means risks with significantly different values are treated the same and absorb a similar amount of underwriting time.
For example, underwriters spend the same time on a $5K risk as a $500k risk and commonly work on low value risks ahead of higher value risks.
As a result, high value risks that have a higher lifetime value than others are vastly under-prioritised. Underwriting capacity is not intelligently matched to the value at stake.
Prioritise solves this problem by ranking risk submissions in order of value – across multiple dimensions, profitability, retention, conversion, preferred broker and others.
This enables faster turnaround time for higher value risks, higher conversion and adjusts the incurred expenses to the value of the risk.
Most importantly, it enables underwriters to optimise the value they create each day, not the number of risks they process.
By augmenting, filtering and prioritising submissions before the underwriting starts, underwriters are able to maximise their time “underwriting not processing” and crucially allocate their time to the risks which have the highest value.
As discussed here, the focus of underwriters (and more broadly the underwriting process) is not on transforming the risk submission into a state where work can start. Rather, underwriters should focus on maximising value, using their rare and unique judgment to make the right decisions about the selection, price, coverage conditions and ultimate conversion of the risk.
The reward to the insurer is an improvement in the cost of driving growth, increasing the ratio of profitable risks bound without adding additional expenses.
You can read more about how to break the relationship between expenses and growth in our previous blog here.
