NEW TOWERGROUP RESEARCH QUANTIFIES INDUSTRY INEFFICIENCIES AND DEMONSTRATES HOW LEADERS CAN ACHIEVE SIGNIFICANT GAINS
Up to 30% Profitability Improvements and 90% Reduction in Back-and-Forth Handoffs Revealed ORLANDO, Fla. — May 23, 2005

It’s not your same old insurance industry, especially regarding underwriting, according to research on the current state of the underwriting process in the property and casualty market released by TowerGroup today. The study, commissioned by Riskclick, revealed that carriers that are implementing advanced technologies for workflow management, such as business process management solutions, business-rules engines and predictive analytics, are enjoying dramatic improvement in their overall profitability.

Making the announcement at the ACORD LOMA Insurance Systems Forum, Riskclick CEO James DeSocio explained, “We commissioned this study to help carriers better understand the state of the market and identify technologies and business practices that can bring tangible results. In talking with insurance carriers everyday, we see the insurance industry’s growing demand for consistent, profitable underwriting. To support this goal, they are looking for metrics and data that they can use to benchmark their operations against best practices.”

The study quantified some of the inefficiencies typical in the industry. TowerGroup found that as much as 70 percent of the time in the underwriting process is spent on low level tasks, and that the policy production process can result in errors up to 10 percent of the time. Further, TowerGroup identified that underwriting leakage could be as high as 9.7 percent of all net written premiums for personal lines carriers, and could be even higher for commercial lines.

Deborah Smallwood, vice president, TowerGroup Insurance Practice notes that “In the communications back and forth between the agent and the carrier's underwriting department for a submitted application, we've seen up to 16 handoffs and up to 16 days before all the information required to underwrite the risk was exchanged… Automation of endorsements and renewals lagged even farther behind.”

Carriers are trying to streamline their complex systems, manual handling, carrier-agent interactions, and number and level of business and technology personnel involved, according to TowerGroup’s findings. In addition, leading carriers are increasing their use of data-driven, empirically derived decisioning for more accurate, more predictable, more robust and more consistent processes.

Other important TowerGroup findings include:

• Pass-through rates for personal lines carriers with limited use of technology are in the 20-25 percent range, while carriers using more sophisticated technologies demonstrate nearly 80 percent pass-through rates. Commercial lines carriers have lower technology utilization and correspondingly lower pass-through rates.
• 80 percent of personal lines carriers use some combination of business rules and predictive analytics to better segment their risks. Up to 20 percent of small and mid-sized commercial lines carriers use predictive analytics and business rules for increasing the number of pricing options for agents in order to gain more risk segmentation.
• Despite advanced and data-driven underwriting solutions, 10-20 percent of personal lines solutions (and more for commercial lines) require the review of an underwriting professional. As much as 60-70 percent of time in the underwriting process is spent on low-level tasks—assuring submitted information is complete, accessing and retrieving critical information, and verifying information prior to making a final decision.

TowerGroup’s research also identified four overriding technology trends in property and casualty underwriting:

• Eighty percent of personal-lines carriers run some level of straight-through processing (STP), while less than 10 percent of carriers have any STP for commercial lines. With a minor IT investment and major business re-engineering, one carrier reduced the back and forth from 95 percent of the time to less than 5 percent. Another carrier reduced the back-and-forth count from an average of 16 times to less than once.
• Workflow management products can be used to more quickly and easily automate complex, multi-faceted underwriting processes. One carrier retired 85 systems, saving close to 50 percent on maintenance and support expenses.
• The search for more consistency, more accuracy and more predictability in underwriting decisions is leading carriers to enhanced use of data driven and empiric decision environments helping them increase pass-through percentages to more than 80 percent. One carrier’s automated decisioning environment automated 80 percent of all personal lines and within two years had improved profitability by 30 percent and increased new policy growth by 10 percent.
• Carriers are reducing IT maintenance and support with robust business process management, business rule, predictive analytic execution and rating engines that are pre-configured with user interfaces and templates, which allow them to be maintained and supported by business users. One carrier improved time to market and overall costs by implementing a robust business-rules engine and rating engine.

About Riskclick
Riskclick provides Business Process Management (BPM) solutions for the insurance industry. Headquartered in New York with operations in London, Riskclick provides users in 43 countries with solutions that manage mission-critical insurance processes.

Riskclick’s underwriting solution, Riskclick Underwriting, is a comprehensive exception-based underwriting system for new business submissions, endorsements, and renewals across personal, commercial, and specialty lines of business. For additional information, visit the company Web site at www.riskclick.com.

Media Contacts
Carol Romeo
CBK Group
(201) 556-9404, ext. 110
cromeo@cbkgroup.com