Current workflows collect a vast amount of data in the proposal form but only a minimal fraction of the data is systematically stored in a database that can easily be interrogated at a granular level and linked to claims experience.
While InsurTech companies have been around for a few years now, the current pandemic and the start of a very hard market after 15 years of constantly declining rates have accelerated the conversations about fully digitalising insurance process.
From client acquisition to policy pricing to management reporting to claims handling, technology exists to create a fully integrated and efficient workflow that would not only cut manual processes but will also capture data systematically for data analytics.
What is an integrated and efficient workflow?
An efficient workflow starts when a proposal is submitted by or on behalf of a prospective policyholder.
Digitalisation should start with the proposal form, a prospective policyholder should fill out a digital proposal that captures all the data required in a consistent format and all records stored in a database.
Key elements of the proposal are automatically transferred to the pricing engine where the required premium and other elements of the quote are generated. A quote is generated and presented to the broker/client. If the quote is accepted the policy documents are automatically generated and the agreed premium and other elements of the policy transferred to the underwriting/finance system. If the quote is not accepted and the policy not bound, the record is still saved for future data analytics.
Efficiency is created when the data are entered once and automatically transferred within the system and consistently stored in a database to generate real-time data analytics that would allow underwriters and management to be agile and responsive when managing their portfolio.
Integration of systems is by far the biggest challenge insurance companies face. A typical insurance company would have underwriting systems, pricing models in spreadsheets, a claims handling system and a finance and accounting system that are not synchronised with each other. The data are manually entered in each of the systems and subject to errors.
In an ideal world, a fully integrated workflow should consist of one system that has the required components for each of the functions: underwriting, data analytics, claims handling and finance/accounting. Therefore the data is entered once and it flows through all the required processes that serve different purposes.
Apart from adding efficiency, a fully integrated system allows presentation of real-time management report on premium written, business written, business declined and key pricing indicators not only at portfolio level but also at a granular level.
What is the link between digitalisation and profits?
The number one reason digitalisation of commercial and specialty insurance classes is not widespread is reluctance to change.
A large number of commercial and specialty underwriters see digitalisation as a burden to satisfy the needs of other business functions (finance, claims and actuarial) and fail to see the benefit that access to data would bring to pricing and risk selection, ultimately translating into profits.
For a start digitalisation can easily cut two or three hours of the work day of underwriters that can be invested in pursuing new business and developing new products. If the current business can be served with fewer people, that translates to lower expenses and higher profits.
Secondly, exposure data that can be linked to claims data in real time allow underwriters and actuaries to be more responsive to pricing and risk selection. Profitability reviews at granular level is one of the most important aspects of portfolio management and digitalisation provides the tools to prepare and present these reviews in real time to all stakeholders.
Last but not least, better data presented to partners such as capital providers, carriers and reinsurers generates confidence that translates to long term support and relationships.
What is the benefit of digitalisation for Managing General Agencies?
MGAs operate on a delegated authority basis and they write policies on behalf of an insurance carrier who provides pre-agreed underwriting and pricing parameters. The MGA is compensated by an upfront commission irrespective of whether the business written is profitable or not.
The carrier sees a very high-level profile of the business written through monthly bordereaux often submitted in spreadsheets and a summary of claims.
The MGA does not assume any claims risk, their risk is losing the support of the carrier (often at a short notice) and having to start all over again! The biggest mistake MGAs make is to do the same thing over and over again and expect different results. Therefore, the typical MGA changes carrier on average every five years and there is an economic cost associated with these changes.
A fully digitalised MGA would not only benefit from an efficient and integrated workflow significantly reducing processing time but they would also be able to provide real-time access to data to their carriers and reinsurers, generating transparency and confidence ultimately translating into long term relationships.
In addition, it is no secret that the traditional model of compensating MGAs through high upfront commissions is being significantly questioned by insurance carriers who argue they can digitalise their operations and sell the same business directly.
Therefore, going forward we expect that only truly successful and digital MGAs that can operate with a lower upfront commission combined with a share of profits would have the confidence of long-term partnerships from carriers.
How does TitleHub help MGAs and carriers offering Title Insurance create digital platforms and efficient processes?
At TitleHub we have a multi-disciplinary team with the expertise to design, develop and deploy a fully digitalised platform from customer acquisition, to pricing to claims handling.
We start by developing a technical pricing framework that creates a consistent approach to derive premiums for real estate transactions requiring title insurance.
We then work with InsurTech partners to develop a fully integrated platform that allows MGAs to go from receipt of the proposal to presenting a quote in a fraction of the time than with current systems and processes.
Our solutions are tailored to fit the type of business targeted by the MGA as well as their internal requirements.