Here we consider some of the strategic dilemmas faced by those companies who produce and maintain underwriting manuals. Manuals have been around for many years, first as paper manuals, then on floppy disk and CD, although now almost all are on-line. But where do they go from here?
The creators of these reference tools (often reinsurance companies) face a number of dilemmas in terms of where they take them next. What is important is to have a well considered and documented strategy for the manual that fits not only with the underwriting strategy but corporate strategy too. Important questions to consider include:
- How often does the manual get updated?
- How is ongoing production resourced to get real value for money?
- Who has access to the manual?
- Is the manual also a training tool?
- Does it need an evidence base?
- How can calculators help the decision-making process?
Not a one-off job … As any developer of an underwriting manual will know, one of the biggest problems is managing the ongoing maintenance. Once you have created the monster it needs feeding regularly. The consequences if you don’t? Both content and technology can become outdated pretty quickly.
In terms of the development cycle, most existing manuals sit somewhere on the diagram below and some may well be in desperate need of movement on to the next stage of their development.
It is interesting is to compare an underwriting manual life-cycle with that of other products, particularly those that use technology. What is the shelf life of other technology products? Five years? Three years? Certainly for any browser-based offering, leave anything over five years and your product will be starting to show its age. That’s if it still works.
Possibly the biggest dilemma though is how to resource the production of an underwriting manual. These days in many companies, headcount restrictions are a big factor in controlling and reducing bottom line costs. To maintain a team (even a one-person team) as a dedicated resource for researching, production and updating, a manual can be seen as expensive and unnecessary by those removed from the risk management function. But to do the job really thoroughly to ensure a top-notch product can cost big bucks.
The question is often asked: Is underwriting manual production a full time job anyway? Does it need to be continually updated or is some regular tweaking all that is required? The answer is categorically that it does need regular attention. If not regularly reviewed, continuous market and regulatory changes, and changes in the nature of risk, can mean that the content of a manual can become, in a short time, out of date; at best, irrelevant but harmless; at worst, responsible for poor and unprofitable decision-making.
With the ability to carry out real-time updates to a web-based system, the production of an underwriting manual should be getting cheaper. The question then arises, should a manual be resourced in-house in terms of technology and content or is outsourcing or a ‘turnkey solution’ the way of the future?
Global or just all over the place?
Cost pressures often force international organisations to provide a global manual which is used in all territories. But does a one-size-fits-all approach really work? Products are different from one country to the next. For instance, disability products vary widely between markets – in particular the definitions of disability, the product features and the triggers for claim. And so too do the causes of claim and local experience, all of which should have an impact on underwriting guidelines.
In North America the situation is complicated by preferred life rate differentials. How can rating advice cope with a multitude of different product definitions? Short of tailoring content to the characteristics of each individual market, the producer of the manual can tolerate some compromises; but it is important that those do not significantly impair the credibility of the manual.
If the content is to be translated into multiple languages, that takes time and effort. An overly long and poorly managed process can result in the various versions of the manual being out of synch with each other – resulting in confusion between markets, inconsistencies and possibly lack of credibility.