Digital Transformation for Insurance and Underwriting Processes - Caroly Martin (2015)

1. © IBM Corporation 1
Digital Transformation for
Insurance and Underwriting
Processes

2. The insurance industry is facing a broad range of disruptive forces
Rapid digitization
Rising customer expectations
Economic environment
Sophisticatedfraud
Changingdemographics
Digitization is creating new modes of interaction and
unprecedented connectedness. Competition is
coming from new and different areas. Operations
and business models are being transformed
The new generation of customer expects
individualization, responsiveness, integration and
seamless experiences
Baby boomers are nearing retirement and millennials
are impacting business across the board, from products
to interactions
Economic volatility and a challenging investment
environment is adversely affecting the insurance
sector and eroding profit margins
Incidence, sophistication and severity of fraud is
increasing
$
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5. Reshapetheoperatingmodel
Value proposition focus
Reshape the customer experience
Valuedeliveryfocus
Sources:
1. “Digital reinvention”,IBM institutefor Business Value, December 2013
2. “Inside the mind of Generation D”, IBM Center for Applied Insights, October 2014
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Digital disruptors break the mold
Performance vs non-digital
peers on key metrics
Share of
customer wallet
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3-yr customer
retention
% of new product dev
initiatives released

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Disruptors are reinventing business processes and
leading their industries with digital transformations
Personalized front-
line decision making
Real time insight
driven processes
Ecosystem-based
innovation
New mobile apps are
consolidating decision
making at the fingertipsof
people who need to act
Insight from nontraditional
data sources is being infused
in business processes to
create new business moments
New innovations are
composed leveraging
digital services from a
broad ecosystem
Source: https://www.facebook.com/GunesSigorta/app_516300021734093
Source: http://www.metromile.com

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The Underwriting Process is critical to insurer performance
Transforming can have broad impacts across the value chain
Customers Reinsurance, Billing, other
back office functions
Channel Management
Claims Policy Administration
Underwriting

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Key Challenges in Underwriting
Current State Challenges:
• Existing process are
– Slow,
– Inefficient,
– Inconsistent
– Lack of accuracy
• Inability to assess risk accurately
leading to mispriced rates
• Low straight-through-processing
leading to higher costs
• Inability to create flexible risk tiers
to match customer segmentation
• Inability to roll out new insurance
products quickly
Desired / Goal State:
• Underwriting process that are driven by
consistent rules and workflow
• Ability to access required underwriting
information at the “right” time in an easy to
understand format
• Automating the underwriting steps (low
touch) where possible
• Business operations that use complete
visibility and embedded analytics to act in
real-time
• Business processes that adapt and extend
into the digital economy - securely
Insurance providers face numerous obstacles to grow revenueprofitably

10. Automated
Underwriting
Application or
Submission
Quote/ Policy
Issued
Pricing /Rating
Engines
Policy
Administration Systems
Channel
(Insured, Brokers:
Risk Manager’s &
SpecializedPortals)
Broker /
Agent Station
Broker /
Risk Mgr
Portal
Specialized
Portals
Business Rules, Process &
Information Integration
Underwriter
Receive
Submission&
Assign
Resources
Determine
Needs
Gather &
Evaluate Risk
and Eligibility Information
Determine
Re-insurance
(P&C only)
Price and
Prepare Quote
Negotiate
& Bind
Management, Supervision & Review
Back End Systems
(premium audit, stat
reporting, reinsurance, cat
analysis systems, claims
systems, actuarial, billing
and collection, etc.)
Clear the risk or
determine eligibility
Exception or
Manual
Underwriting
Design Principles:
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 Automated / rule driven
 Single underwriting interface/customer view
 Integrated (workflow and technologies)
 Personalized / customized
 Tracked and managed (KPI)
Underwriter
The goal of optimization is to leverage advanced technologies that
enable an efficient and more automated UW process

11. Improvement in underwriting capabilities can realize several tangible benefits
Business Value:
 Improve financial results:
 Productivity gains
 Improved underwriting decisions
 Lower cost structure
 Shorten the response time to new business initiatives and new
products
 Enable operational efficiency gain
• Focus on automation, speed, and business
process management will provide:
 Underwriting cost savings
 Improved data quality
 Shortened sales cycle
 Quicker exposure issue identification and resolutions
 Improved risk management
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12.  To flexibly and reliably manage
repeatable, automated
decisions
 When decisions change
frequently
 To increase straight-through
processing
 When decision services can
be shared across systems
 To manage and govern large
numbers of rules
 When real-time events require
immediate actions
 Manage business policies at scale
 Capture, automate and operationalize your business expertise
 Enable social collaboration to manage and govern business change
Apply Operational Decision Management…
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13. Challenges
 Easily manage membership and policies for roadside
assistance, travel and insurance
 Manage risk more closely and bring consistency to
underwriting practices
Onboard more than 12,000 new members per
month with better customer service
Benefits
 Instant: Reduced cycle time between a customer request
and quote
 Seamless: Manage all underwriting rules as a single
versionof the truth, for consistent underwriting
 Insightful: Finer risk classification throughimproved
segmentation to write more profitable policies
Solution
 BPM and Business Rules for member subscription
management and up-sell of additional services
 Onboard more than 12,000 new members permonth
generating $160 million annually inrevenue
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Other Metrics
•
•
•
•
•
Quotes submitted per month increased from approx
20,000 in 2005 to 60,000 in 2010
Policies in force increased from less than 700,000 in 2005
to over 900,000 in 2010
Quotes by agents up by 25%
Approx 3000 rules in production across SMBcommercial
lines
100% of underwriting rules (creation, testing, what if
scenarios) done by business users (businessanalysts,
underwriters and actuaries working with analyst)
Challenges
• Rules were hard coded and decentralized
• Manual processing
• Carrier was unable to enforce risk and underwriting guidelines
• Build an agile underwriting system that supports growth
strategy and speed up requirements
Solution
• Carrier embarked on a legacy modernization project and built
a web-based underwriting system
• Based on WebSphere infrastructure and BRMS
Benefits
• Increase in straight through processing rate from 17 to 76%.
• Increased new business quotes by 40%.
• Speed to market gains of over 50% with rule changes in
less than a week vs 5 months.
• Able to obtain underwriting decisions at multiplepoints
during the process and proactively segment unacceptable
business
Fortune 500 P&C Insurance Company
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15. Digital and Cognitive will allow commercial underwriters to assess the
individual risk of each customer in a personalized approach
1
2
George,
experienced
underwriter at
OpenInsurance
Bob, owner and CEO
of chemical products
company, an
important client of
OpenInsurance
George is asked to
negotiate a contract
with Bob to insure a
new chemical
factory
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Near Future
George rides a train to the
factory site. On the way, he
checks Bob’s contract and
claims history. He also gets
geological and meteorological
data for the factory site for a first
risk assessment
During the walk-through,
cognitive systems located in
OpenInsurance’s back office
highlight risk-critical areas
which George immediately
points out to Bob
George and Bob reach a
satisfactory deal, for which
the account manager at
OpenInsurance has to sign
off. Using George‘s tablet,
they patch him into a
videoconference to finalize
the contract. Bob signs
electronically.
At the site, he does a walk-through of
the factory. His augmented reality
glasses show the floor plans retrieved
from the public records office, and the
actuarial risk profile of the equipment,
raw materials and end products he is
seeing
Afterwards in Bob’s office, George
transfers the findings to his tablet
which he can show to Bob to discuss
cost-effective risk mitigation measures
and decide on a final rating
What’s ahead in the future?
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20. Will you disrupt or be disrupted by your industry?
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