The Interconnected Insurer

Jamie Rodgers, Vice President, Property and Casualty Insurance Practice Lead, CGI
Clinton D’Souza, Senior Business Analyst Consultant, CGI Insurance Vertical

Technology advances over the years have played an undeniable, enabling role in giving insurers new opportunities to make both large and small adjustments in their business and operating models. For example, as technology has moved from mainframe to a local area network (LAN) to wide area network (WAN), and now to the global inter-network, businesses have been able to improve their abilities to work across business units, divisions and others outside the formal walls of the company.

Now the Internet and “World 2.0” have given the insurance industry – carriers, suppliers and distributors – a whole new set of opportunities to explore for sustainable performance, albeit packaged with a universe of new expectations by customers and partners, as well as new strategic threats. Insurers taking best advantage of the opportunities can differentiate themselves and capture a greater share of the pie.

Arguably the most important impact of the information age, beginning with the mainframe computer to the Internet today, has been the increasing ability for organizations and individuals to interconnect. That is, to access new sources of information and data; collaborate virtually with suppliers and partners; share data cooperatively with competitors for mutual benefit and allow customers to serve themselves efficiently.

In this article, we delve into the concept of virtual or remote underwriting – a concept enabled by being able to interconnect with previously untapped sources of data.

Underwriting and the Interconnected World

One characteristic of a successful insurer is the way in which it identifies, understands and manages risk throughout the lifecycle of a policy. Obviously the underwriter plays a critical role; he or she needs the proper information and tools to assess the risk accurately and price it appropriately. For example, it’s valuable to know that a prospective packaging business applying for coverage is close to a factory that makes explosives. It’s also valuable to know the particular geographic area within which the business is located is highly susceptible to water damage based on past claims and available flood plain data.

In the fairly recent past, this information could only be collected by physically inspecting the proposed risk to be insured and by assembling ancillary paper-based information. Even then, gaps in information would make underwriting knowledge of the risk less than optimal.

Today, however, through the interconnecting power of the Internet, risk data from a range of new sources are available virtually. To an extent, the quantity of virtual data is much greater than that of data collected physically. Not only does interconnectedness reduce the cost of collecting risk data, but it also serves to improve the quality of the decisions being made during the underwriting process. No longer do underwriters have to visualize a location from a written inspection report or narrative, they now have the ability to view and evaluate risks from their desktop.

Google may be the most well known source for geographical data (and does have insurance industry-specific solutions), but more providers with solid insurance credentials are establishing themselves in this space. Offerings include data helping to validate and reconcile physical addresses, data providing insight into previous coverage and claims history, data helping to visually map surrounding buildings and the inherent risks they present, as well as geo-spatial data that graphically illustrate land features. These data can all be used and referenced in automated business rules systems. To some extent, the geographic and risk information suppliers are providing to insurers is information untapped by insurers in the past. Also, providers are tapping into new, complementary data sources to add value to their offerings.

Luckily, information technology is keeping pace with the hyper-digitization of information and can easily compile mountains of individual data points, “information pixels,” into a clear and complete picture of the risk. The more data, the more accurate the risk picture. But as with any technology, the final solution is only as good as the framework within which it operates. Being able to capture decades of experience of professional underwriters and replicate both the art and science of underwriting within a system’s decision framework is how remote underwriting becomes a near-term reality.

The flexible business intelligence engine illustrated in Figure 1 uses a variety of analytic techniques to assess the full context of the data set against the acceptable risk profile for the insurer. Broadly speaking, the engine produces a three-state decision:

• The risk is clearly within the prescribed risk appetite and so can be automatically processed quickly through to closure, providing a high level of customer service.
•The risk appears too great when compared to the insurer’s appetite, and so the business needs to be declined sensitively by skilled personnel and in accordance with the insurer’s policies and procedures.
•There is some ambiguity about the level of risk, and so skilled underwriters need to review and make the final decision. The technology can help ensure a consistent decision is reached regardless of which underwriter handles the case.

Remote, virtual underwriting, when combined with the flexible business intelligence engine noted above, is of particular value when considering the new mobile world and the self-service, instantaneous expectations of the new consumer. Much of this new data is available on an almost instantaneous basis through Web services or other application interfaces. Data sets can also be of the right size to meet the in-memory design principles of the new smartphone and mobile applications.

Tapping into new data sources and driving the data through flexible intelligence systems can help achieve the goals of straight through processing without sacrificing underwriting quality and control. In fact, the quality of those decisions may indeed be greater when conducted virtually.

Conclusion

Rapid advancements in technology and the exponential expansion of data availability are providing Canadian insurers with opportunities for significant and sustainable financial performance improvements. To realize the benefits, a carrier has to interconnect their external business partners, their internal business processes and even consider connecting with their traditional competitors on selected initiatives. The truly ‘Interconnected Insurer’ can build a full picture of the risks they face and open the door to accurate and cost-effective remote underwriting. The potential benefits are truly inspiring:

• reduced costs, by reducing the need to inspect physically and gather information about the risk.
• improved quality, by tapping into previously unreachable sources of risk data to enhance decision-making.
• improved results, through better, more accurate pricing, so that premium dollars are not left on the table.
• meeting customer expectations, through feasible technical and data solutions that allow for straight through processing at speeds required for self-service.