How life insurers can make underwriting investments that pay off

How life insurers can make underwriting investments that pay off

There is much to automate in the new business process but where should automation dollars be spent to provide the best returns? The new Celent report, Making Life Insurance Underwriting Investments That Pay Off, provides a framework for answering this question. Celent’s analysis divides the new business and underwriting process into 22 logical components of work. Each component is subdivided into potential levels of automation ranging from minimal automation to highly automated. Through an online survey insurers graded themselves in each of the processes according to their level of automation.  The results were not surprising; however they highlighted how far behind the life insurance industry lags in this area.

Automation blog graphic

Automated new business and underwriting processes carry the promise of improved results, but can come at a significant cost, including the hard costs of purchasing technology as well as the softer costs of implementing it and changing processes.  Celent’s analysis showed that automation does indeed improve key measures related to productivity, accuracy and time which can help offset the costs.

One of the keys to reaping the rewards of the investment is to define the strategic goals prior to the automation. Some life insurers have a strategy to be a low cost provider and may achieve low cost through significant investment in rules automation. Others want to provide a high level of service and may focus on the customer experience by automating the customer-facing processes. 

Key questions to ask when deciding where to automate:

  • What is the strategic focus?
  • What tasks are being done, and by whom? Does that actor have to do them?
  • Where can automation create capacity to grow the book of business?
  • Where can automation create a better decision?
  • Where can automation create a better customer experience?
  • Which level of automation will result in the best key metric results?

Are your investments paying off? Insurers can use Celent’s latest report to compare their level of automation to the underwriting capabilities framework and their peers to ascertain if they are making the most of their underwriting automation investments.

Emerging Technologies in General Insurance

Emerging Technologies in General Insurance

The Celent webinar yesterday, Emerging Technologies in General Insurance, was very well attended and there were more questions than time allowed. Thank you to everyone who was able to attend and who contributed. If you didn’t get a chance to join us, the recording is posted at

Below are the answers to the questions that were still outstanding at the end of the session:

Q: Is there such a thing as an Insurance Carrier Fraud Maturity Model?

· No, but great idea and don’t be surprised if you see one in the upcoming Celent report on fighting insurance fraud!

Q: For consuming telematics data, is this something that a carrier should do standalone or are there industry schemas such as IBM’s IIW that add value in this regard?

· We have observed a difference of approach between US carriers and insurers in the UK. Typically in the US larger carriers are building out the infrastructure and model themselves to capture, analyse, keep and use customer telematics data. In the UK the preference is to use partners or the vendors of the devices to gather the data and do the analysis on their behalf – sharing the results of the analysis for use by the insurer. It’s worth noting there are already efforts underway in the UK and German associations of insurers to discuss a common format for this data to allow the information to be shared between vendors at time of renewal, although I don’t believe they’re reviewing industry warehouse models such as IIW. There is no one size fits all approach and insurers using various approaches are meeting with success although Celent expects some common standards to emerge for sharing this data between insurers, agents, brokers and even customers should they request it.

Q: What carriers are best-in-class when it comes to Big Data? What technologies do they use?

· Big Data is still more of a buzz word for carriers than reality today. The larger insurers have Big Data programs/pilots underway due to the amount of data that they have. Smaller carriers are considering Cloud options and mid-size carriers for the most part are watching the results of the other two.

Q: Isn’t expense control closely associated with underwriting efficiency? What do you see adoption of emerging technologies wrt to underwriting?

· Expense control covers all insurance functions and processes, as well as the technologies that support/automate these solutions. Analytics have been used by a lot of carriers to create more effective and efficient UW decisions. We expect the use of social data to play a great role over the next 1-3 years with respect to UW, as well as the continued use and maturity of analytics in the UW process and decisioning.

Q: Why hasn’t the notion of insurance focused open source taken off?

· Open source has taken off in many carriers and is in use in varying degrees and levels (operating systems, libraries, ESBs, portals; and to a lesser extent applications). Analysts do not typically include open source solutions in their reports (as separate from other non-open source vendor solutions) for several reasons. First, the analyst process of evaluating solutions starts with a vendor, their profile, their implementations, customer references, etc. Second, vendors often use open source as a component or even a core of their applications that are included in most vendor reports.

· Many carriers prefer working with a vendor rather than developing solutions internally and thus select a vendor solution over open source.

Q: Many of the new data sources create privacy “surprises” when consumers intuit that a commercial organization knows what it knows and puts it to use, even if it benefits the consumer. Policy is of course lagging technologies but it will evolve unpredictably. California has limits on telematics data use, for example. How the insurance industry implements emerging technologies has a public relations component and potential for igniting a very fragmented state-by-state way that data can be used. What does Celent see as far as some uses being especially dangerous from a brand perspective and liable to be shut down by regulation?

· Pricing and eligibility decision rules must be filed with the states. Whether file-and-use or preapproval jurisdictions, all regulators expect that insurers declare these parameters with their organizations. Using any non-approved data source to price or determine eligibility should be strictly off limits.

Mirror, Mirror – How Fair Are My Business Analysis Competencies?

Mirror, Mirror – How Fair Are My Business Analysis Competencies?

The identification, communication and management of business requirements is a critical skill set in any company pursuing significant change. In order to determine the state of the business analysis function in the financial services industry, Celent teamed with the International Institute of Business Analysis (IIBA) to survey banks and insurance firms and take a snapshot of current performance in key business analysis skill areas. The survey was designed to hold a mirror up to the industry and reflect its perception of its performance. These are reviewed in a recently published report – Business Analysis Competencies: Mirror, Mirror: A Self-assessment by Banks and Insurers.

The data confirms what many people say in discussion on this topic – that skill development in business analysis is often insufficient to maintain sustained performance at sufficient levels. Very few companies rate their performance in any business analysis area as a strength. The highest rating was for the elicitation skill in banks and this level was assigned by only 21% of the banking participants. The study also collected opinions on which BA competencies are most critical to successful implementations. The good news for insurers is that both Life/annuities/health and P&C insurers report a close match between their highest ranked importance areas (elicitation and requirements analysis, respectively) and their performance. That is, delivery in these areas is ranked at or above average, indicating that investments that have been made are beginning to pay off and deliver benefits.

Many financial services companies are updating automation systems and continuing to improve business processes. For organizations that are modernizing their platforms, an expected benefit is to reduce the dependency on IT and move maintenance and some development into business analyst areas. Many software vendors are producing products which are designed to be configured, not programmed. This is intended to increase flexibility and speed in system development and maintenance. Neither group will realize its goals without solid business analysis skills. The Celent/IIBA survey identifies the specific gaps in business analysis skills in banks and insurance companies. Celent encourages financial services firms to use the results of this survey to examine their current approach to business analysis, place their bets on which areas are most important, and invest in skill improvement.