Underwriting engine banana skins
SelectX has, over the years, been involved in a number of projects supporting underwriting rules engines (UREs). We have helped firms choose the best URE for their needs. This can involve defining business requirements, assessing the merits of different products based on objective criteria and short-listing contenders for in-depth consideration.
We have written rule sets for insurers, reinsurers and software providers. And we have carried out strategic reviews for firms who already had a URE in place and were looking to optimise its performance.
So over the years we have identified a number of potential banana skins that can disrupt a URE implementation.
When your project to implement a URE kicks off, don’t rush headlong into the process of writing the rules themselves. Don’t be panicked by those tight deadlines. Sure, it’s a big piece of work but there are more important things to do first.
We believe that one of the most important initial stages in the project is the creation of the underwriting philosophy document – the ‘terms of reference’, if you like. This is the play book for the creation of the knowledge base that sits in the URE. The usual components of the knowledge base are the e-app, the reflexive rules, the various table-driven rules (routine evidence requirements and BMI for example), the dictionaries of search terms and the ‘combination rules’ that deal with multiple inter-dependent risk factors.
The philosophy document does not attempt to replicate any business requirements that might have been defined but rather sets out the assumptions and rules around which the knowledge base is shaped. It defines things such as:
- Minimum and maximum age limits
- Preferred and non-smoker criteria
- How risk evaluation varies according to product
- Minimum and maximum ratings; also rating hierarchies.
It minimises the need for reworking rules part way through the project and enables best practices to be established at outset.
Ideally the underwriting philosophy document is a ‘living’ thing that is updated as and when necessary. It may just need to be tweaked during the implementation process but after the URE goes live it needs to be updated to reflect any changes made to products and underwriting stance – and the latter may be just product- or risk factor-specific or more general in nature, such as when a carrier’s appetite for risk alters.
Another mistake that we see all too often is that, after deciding to invest heavily in a URE together with supporting modules such as a quotation engine, workflow control and management information, the carrier then plugs the technology into its existing new business process without giving thought to how a whole new level of speed and service – maybe even an exciting new proposition for customers and sales people – could be achieved.
Before starting the implementation process an essential precursor is to review the ‘as is’ process, remove any redundancy and inefficiency, and to define the ‘to be’ process which will support and be supported by the URE. Be bold, be adventurous; think beyond familiar boundaries. Maybe bring in consultants that will help and encourage you to do so, but who can also help you manage the change, such as in selling the new processes internally. Projects have missed their mark because managers didn’t do what was needed – such as for fear that ‘the sales force wouldn’t like it’.
Remember that the point of technology is the ability to do great new things, not old things a bit better.
The final classic mistake is to treat the implementation of a URE as a traditional IT project in which, after the system goes live, business and IT resources are then deployed on the next ‘big thing’ (or, worse, carrying on with the routine stuff). A URE is not a ‘launch and leave’ project; these tools need to be managed and maintained by qualified and, ideally, dedicated resources. The supporting modules for rules maintenance, testing and management information should be sufficiently user-friendly to enable business people to maintain the engine without the need for IT involvement – this is so important. It also means organising the underwriting department in such a way that the URE is maintained by a purposely created team.
So, in summary:
- Think big and have an ambitious vision.
- Thoroughly plan the URE implementation project and make the philosophy document the first step.
- Plan and resource the ongoing management of the tool.