The underwriting process is an important step in the insurance industry. This is the time when insurance companies evaluate the risks involved with the insurance policies they will offer to potential customers.
Increasing efficiency in the underwriting process can have a significant positive impact on insurance companies, including increasing profitability from customer satisfaction. In this article, we will explore several strategies to increase efficiency in the underwriting process.
What is underwriting?
Some of us may be unfamiliar with the term underwriting. Underwriting is an important process in the insurance and financial industries. This is the step where the company evaluates risk and determines whether they will accept or reject insurance requests from prospective customers.
Underwriting is a key step in maintaining the stability and profitability of an insurance company because decisions taken in this step can have a major impact on a company’s financial health.
Beside receiving or rejecting requests from prospective customers, underwriting also has a role in determining how much premium they have to pay.
The insurance company will look at a variety of factors to determine the premium that the customer must pay, including customer profile risk, type of insurance requested, a history of illness, financial condition, and other factors.
The person in charge of the underwriting process is known as an underwriter. They are tasked with analyzing and assessing various risks based on the profile of prospective customers.
Underwriting processes in insurance companies
To assist companies in assessing risk and determining premium insurance prices, the underwriting process usually involves the following steps:
1. Collect information
The first step an underwriter should take is to collect relevant information about a prospective customer or assets to be insured. This information may contain personal data, medical history, financial information, and so on.
2. Evaluate risk
After the collection of information, the underwriter team will evaluate the risk associated with that insurance. This includes assessing the probability of a claim occurring, the amount that could be paid out in a claim, and other factors that could affect the risk.
3. Premium determination
Based on the risk evaluation, the underwriter will determine the premium that must be paid by the prospective policyholder. This premium will reflect the insurance company’s level of risk.
4. Decision-taking
After evaluating all the information, the underwriter will make the decision whether to accept or deny the insurance application. This decision is based on risk assessments from previous processes.
Challenges in the underwriting process
However, the underwriting process sometimes does not always run smoothly. There are always challenges that the underwriting team must encounter while determining the risk profile of prospective customers.
1. Incomplete information
One of the major issues that underwriters encounter is a lack of complete or accurate information. Without sufficient data, risk assessment becomes difficult.
2. Risk change
Risk can fluctuate over time, and insurance companies must be able to identify these changes and adjust premiums or policy conditions as needed.
3. Regulation and compliance
The insurance industry adheres to strict regulations. Underwriters have to ensure that all processes and their decisions comply with applicable regulations.
Strategies to improve efficiency in the underwriting process
Increasing the efficiency of the underwriting process is key to reducing operational costs and providing better service to customers. There are several ways to improve underwriting efficiency, including:
1. Automation of data
Data automation is key to increasing the efficiency of the underwriting process. By automatically collecting and managing data from prospective customers, insurance companies can reduce the time required to evaluate risk.
Advanced systems can retrieve data from a variety of sources, such as databases, medical reports, and financial records, quickly and accurately. This allows underwriters to focus on more in-depth risk assessments.
2. Utilize artificial intelligence (AI) technologies
Artificial intelligence (AI) technology can be used to analyze more in-depth data. AI may be used to identify trends and patterns in data that people may find difficult to recognize.
Aside from that, AI can assist in more accurately evaluating risk based on historical data and other factors. This not only expedites the underwriting process but also improves risk assessment accuracy.
3. Collaboration between teams
A good collaboration between the underwriter team, the claims team, and the other teams in the insurance company is key to increasing efficiency. Effective communication between teams can help in the exchange of information that is important for making better underwriting decisions.
Aside from that, collaboration can reduce duplication of work and ensure that all relevant information has been evaluated.
4. Training and development
Underwriters who have received proper training can perform more efficiently. Insurance companies must invest in training and development for their underwriters in order to keep up-to-date with the newest industry and technology trends.
5. Performance measurement
Performance measurement is an important step in improving the efficiency of the underwriting process. Insurance companies must evaluate the performance of their underwriters and underwriting processes regularly. This can help in identifying areas where improvement is needed and taking appropriate action.
Achieve increased efficiency in the underwriting process with OCR technology
That was some short information on how to improve the efficiency of the underwriting process.
Increasing efficiency in the underwriting process can be done with advanced OCR, or Optical Character Recognition technology.
By adopting OCR technology, underwriters can automate time-consuming processes such as information collection to risk analysis.
One of the best OCR products in Indonesia is OCR+ from Fintelite. Fintelite provides a free consultation service for companies and entrepreneurs interested in experimenting with OCR technology by accessing https://fintelite.ai/.
