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Live from Brainstorm (almost): The Rules of Automated Underwriting

Mike Koscielny of Auto Club Group gave a great presentation on the value of business rules. As I have described his case before - here - I won't go into too much detail but there were a couple of points I noted in the session:

  • Mike's underwriting team has only grown from 8 to 14 in a period when the business underwritten has grown nearly 6x! If the underwriting team had scaled with the business he would now be employing 45 underwriters!
  • It only took them 3 months to add the capability to underwriter a new state and only 60 days to start offering a specific member benefit (forgiveness of a first accident for members) that they had been considering for years but never been able to justify implementing given the $400,000 estimate for changing the old system!
  • Mike discussed how important regression testing was and how his business and IT folks now collaborate on the testing - a big change from the old system where the business folks thought this was IT's problem.
  • Mike pointed out that not only are fewer policies and renewals being manually reviewed than before thanks to the system but that 100% of renewals are being checked (by the automated system) where only a 10% sample was being manually reviewed before. The automation has made more decisions possible, not just reduced the cost and increased the speed of existing decisions.
  • Early on Mike got many calls from agents asking about "errors" in the automated rules. The rules were not wrong, the agents had just misunderstood them. This consistency of decision is one of the key benefits. In fact Mike said that two recent compliance inspections had resulted in no criticisms at all from the regulators - the rules based system had performed flawlessly.

There was more good stuff but most of that is in the case studies. I will leave the last word for Mike:

We can profitably win the good business we want to win and lose the bad business we want to lose

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Phil Ayres

These are really interesting stats. Certainly I know from personal experience implementing combined workflow / doc management systems for retail insurance that great efficiencies can be achieved.

Quality enterprise grade software can also be enabled to handle much of the back end grunt work as well, especially around claims handling. This should help many organizations really strengthen the business case for a new system, since reducing costs around the non-revenue earning portion of the business often goes down well.

I'm interested to look deeper into the complexity of rules in retail insurance, as well as my current area of interest, annuities. Especially for managing suitability, rules implementations are essential to ensure compliance.



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