The importance of accurate underwriting has more than justified the substantial investment in time and expertise required. The emergence of insurtech and numerous application programming interfaces (APIs), however, has helped providers find new efficiencies through automation and transition into the digital age — taking some of the headache and cost out of a previously meticulous and expensive essential function.
Underwriters, either within the company or through an auxiliary agency, use a combination of qualitative and quantitative analysis to determine needed coverage and how much it will cost. Where manual underwriting can be a laborious process — with the added possibility of introducing human error — automated underwriting solutions can be faster and more cost-effective. As a Deloitte Insights report The Rise of the Exponential Underwriter notes, “Solutions utilizing intelligent automation, including AI, can process repetitive tasks more efficiently while freeing up underwriters’ time and supporting them to perform more value-added tasks.”
APIs leverage “advanced AI [artificial intelligence] and ML [machine learning] technology in tandem with the insurance company’s underwriting guidelines to determine whether or not to accept the risk presented by the client. This in turn allows providers to generate profit from underwriting and enhance customer satisfaction through more personalized policies.” Examining the manual and automated underwriting processes of different insurers, McKinsey and Company notes that integrating APIs designed for data analytics and risk evaluation was a key factor in “enabling many successful underwriting teams to outperform peers.”
DRC identified an unmet need in the market for a new service to replace manual spreadsheets, and also persist all of the risk data fields for analysis, rather than just the data needed to bind a risk. DRC created a “complete solution” for automated underwriting, DRC Rater, and has continued to enhance the offering since its initial rollout in 2018. With the familiar functionality of Excel, users are able to upload client data in large batches and analyze it according to the provider’s underwriting and pricing guidelines. Client data can also be saved in the secure repository for additional provider analytics.
P&C insurance is particularly suited to automated underwriting because of more consistent business rules and lower variability in risk pools compared with other lines of business like life and health. Eileen Potter writing in Insurance Innovation Reporter notes, “Personal, motor, travel baggage, homeowners and personal accident insurance, which typically have less complex business rules, rating and homogeneous nature of risks make them more amenable for automated underwriting.”
Following the deployment of DRC Rater, DRC has since developed and released a suite of APIs, featuring a number of interchangeable modules capable of representing and updating data in real-time, as well as moving data among disparate systems. The solution will make insurance carriers more efficient, adaptable, and innovative.
In addition to improving the consistency and accuracy of underwriting, automation can in some cases enable products with premiums too low to justify manual underwriting to become profitable when underwriting can be automated and coverage bound without the investment of human capital.