a
Underwriting – Role,
Challenges & Solutions
Jagbir Sodhi, FIA, MAAA, FIAI
INSURANCE INSTITUTE OF INDIA, MUMBAI
23rd February 2012
What is Underwriting?
a
The process of determining the level or risk presented
by the applicant, and deciding whether to accept the
policy, and if so, at what terms and at what price
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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Role of Underwriting
Risk Management
Distribution Management
Cost Management
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
3
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Top Underwriting Challenges
Jagbir
JagbirSodhi|
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InsuranceInstitute
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Top 3 Challenges
a
Disclosures
UW Skills
Processing Hurdles
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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Non-disclosure & adverse selection
Applicant A
Applicant B
a
Adverse
selection
35 year old
Goes to gym everyday
Yearly routine health check ups
No ailments
Healthy and fit
No adverse disclosure
Premium Rs 1000
35 year old
No physical activity
Back pain on and off
Diagnosed with hypertension a month back
Recommended blood test for sugar
No adverse disclosure
Premium Rs 1000
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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Risk Management Tools
a
Underwriting
Adverse
Selection
•
•
•
•
Waiting Periods
Exclusions
Risk Classification
Risk Assessment - rating
Moral
Hazard
•
•
•
•
Deductible
Coinsurance, Copays
Fee Negotiation
Limits, Exclusions
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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• Impact
• Inappropriate,
inconsistent
decisions
• Loss of credibility
• Increased medical
evidence
• Higher declinature
rate
• Loss of business
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
Processing Hurdles
• Impact
• Low NM Limits
• Increase in cost
• Asymmetrical
portfolio
• Claims Repudiation
• Extreme customer
discomfort
UW Skills ??
Disclosures
Top 3 Challenges
• Impact
• Delay in issuance
• Customer cools off
• Dissatisfied
customer, agent
• Reduced business
volumes
8
a
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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Adopt A New Approach :
Because sound decisions are important !!
Tele-Underwriting
a
Automated Expert
Underwriting System
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
Tele-Underwriting:
11
a
Tele-underwriting
Little
"t"
Big
"T"
• Basic data gathered by Tele
Interviewer
• Information sent to UW
• Decision communicated off-line
• All application information
• "Interactive" scripts using
automated "expert" UW systems
• Decision provided instantly
Interviews usually done by skilled underwriters
"Skilled" personnel not required if "Expert" engines are used
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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a
Operational Process
Applicant Disclosures
Tele / Internet
Paper Application
Tele-uw
Expert
Underwriting
Interactive Questions
UW Decisions
Branch
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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Tele-underwriting - Benefits
Customer
• Faster & simpler process
• Interview in privacy
• Skilled interview by trained
staff
• No sharing of sensitive
information with intermediary
• Better chances of claim being
paid
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
a
Insurer
• Reduced non-disclosure :
Better risk information
• Fewer "incomplete"
applications
• Higher conversion rate
• New distribution channel :
More business !
• Improved customer service :
Brand building !
14
Impairment Disclosures:
Improvement with mode of deployment
a
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Paper Based UK Paper Based ZA
POS Interactive
UK
Tele UW ZA
Tele Sales / UW
UK
Paper Based
India
Source: Swiss Re Study
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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a
Tele-underwriting
Did U
Know ?
Tele UW IMPROVES
disclosure rates by
nearly 30% than
compared to any
other point of sale
UW.
Did U
Know ?
More than 75 % of
American &
European markets
USE Tele-UW or
Interviewing in
some form !
Teleunderwriting
REDUCES APS
medical evidence by
~ 50% ?!
Tele UW grown at a
pace of 15% per
year in the last three
years.
UK
Tele-underwritten CI
products nondisclosure has
dropped from 25%
to 7%
UK
In Life products the
drop in nondisclosure has gone
from 11 to 4%
Source: SR study in US/Hank George Survey/ Medicals Direct
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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a
Automated "Expert"
Underwriting System
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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Automated UW System - Concept
a
Most automated systems available do some of the following :
– Identify Yes/No questions
– Refer applications with non-standard disclosures
– Calculate BMI
Expert UW Systems
– Do more than the obvious
– Logic based "Rules" driven engines catering to Life and Health insurance
products
– Capable of identifying "medical conditions" ,"treatments", other disclosures and
triggering appropriate "interactive" questions
– i.e. questions based on the answers received from the customer
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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Interactive Questions
a
Example :
If "Appendicitis" is disclosed,the following questions could be
asked
"Do you currently suffer from this condition ?"
Customer Answer = "No"
"Have you undergone a surgery to remove the appendix ? If
Yes, When?"
Customer Answer = "Yes, 5 yrs back"
"Do you suffer from any complications due to the treatment or surgery ?"
Customer Answer = "No"
Underwriting Decision : Standard
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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a
Expert UW System – Benefits
UW
Decisions
Distribution
• consistent
• appropriate for the
nature of risk
• objective
Technology
• Multi Channel Support
• On – Line
• Tele UW
• Agency
• Banc assurance
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
Cost
• Ability to handle
different lines of
business ( Life and
Health)
• Faster "turn around"
• Saving in hiring &
training costs
• Improved business
turn-over
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Creating an Underwriting Professional
Attract Talent
Nurture Talent
Retain Talent
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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21
a
Way Ahead
Tele-Underwriting
Automated Expert
Underwriting System
Create UW Professionals
Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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a
Thank you
a
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Jagbir Sodhi| Insurance Institute of India | Mumbai | 23rd February 2012
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