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Carriers Hand Over the Underwriting Keys

Carrie Burns March 1, 2008

The concept of front office underwriting may sound like an oxymoron, but year after year, agents and other distribution channels are given more underwriting responsibility.

Many carriers, especially those who work through independent agents, have relied on their agents to do front-line underwriting for a long time, says Karen Pauli, analyst at TowerGroup Inc., Needham, Mass. “The carrier would put underwriting guidelines out there, educate the agents and expect the agent to underwrite the risk based on the requirements,” she says. “But, the real serious underwriting was done when the application hit the company. Carriers have extended the binding authority under the assumption that the agent would underwrite the risk up front, but now, from a personal-lines standpoint, the leading carriers have so much technology loaded behind the application process that it’s almost instantly underwritten.”

Deborah Smallwood, Smallwood, Maike & Associates, sees advancements in technology helping the underwriting process. “When the industry wanted to automate underwriting, quoting and straight-through processing, the vendors in the marketplace took the policy admin systems and moved them into underwriting and said, ‘here, we already do data capture, and we provide rate and quote.’ That was a misalignment of what underwriting needs. Now, technology has advanced with the collaboration of uploads and downloads between agents and underwriters, underwriting work stations concepts, and all the data coming to the underwriter and then facilitating straight-through processing and exception processing.”

CUSTOMER SERVICE

The desire for carriers to improve customer service plays a large role in the underwriting shift. “If you don’t make things easy for an agent now, they’ll just go somewhere else,” Pauli says. “Leading-edge carriers are really pushing technology because they want to make certain that the best agents choose them over some other carrier. In order for the agent to make that positive choice, the whole process of application and decisioning needs to be easy, and the technology is the only way to make that happen.”

Peerless Insurance Co., Keene, N.H., introduced Personal IQ SmartRisk, an underwriting tool that provides real-time quote and submission capability for personal lines automobile and homeowners new business and endorsements. “Predictive modeling is basically what it does for us in terms of pricing business, but we’ve also tied in an automated rules underwriting process, so it does select business on the front end for agents to streamline the rich selection and issuance process,” says Victor Pepin, VP of personal lines underwriting at Peerless. “The two are really hand-in-hand when it comes to underwriting and pricing.”


Victor Pepin

IQ SmartRisk enables agents to use a number of real-time vendors with whom Peerless partners to get real-time quotes, according to Pepin. It runs through a set of rules, and enables the agent to determine eligibility. It then returns to the agent a real-time quote. The agent can then decide whether or not they want to proceed with issuance.

The commercial side of Peerless uses a similar application, Commercial IQ SmartRisk. “We introduced a component predecessor of this product around 2001, and that was the automated application submission component, which gave the agent an indication of the underwriting acceptability and an indication of the pricing,” says Linda O’Donnell, VP of commercial lines underwriting. “We’ve added functionality, starting with automated rules to determine risk acceptability and predictive modeling to determine risk-specific pricing, functionality and whether the rules are there, and agents can get the final determination on both underwriting desirability and pricing for many risks.” If a final indication is not provided, the agent will receive some guidance on how the underwriter will view the risk. 

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