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SMA's Insurance Transformation, Where Strategy Meets Action

Deb Smallwood


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Here's the following podcast and transcript lasting 7:36 here:

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Announcer: Welcome to another ebizQ podcast.

PS: Hello, this is ebizQ's Peter Schooff. And today I am speaking with Deb Smallwood, the Founder of SMA, Inc., which is a strategic advisory firm that services the insurance industry. Deb is also the ebizQ Community Manager for Insurance and today we're going to discuss Underwriting 2.0, the new wave of requirements for underwriting. Thank you so much for joining me today, Deb.

DS: Hello, how are you?

PS: Good. Now, so I've been hearing a lot about underwriting automation for a while. Given the current state of the economy, is this still a hot area of interest for the insurance industry?

DS: It absolutely is. When you look at underwriting, it's all about pricing the risk appropriately. Based on years of experience and data, insurers know that people will file claims but its pricing it appropriately. And over time, the industry has figured out that not only through technology, and through the use of predictive analytics really analyzing the data, and creating automation and underwriting that they can really have the precision pricing.

If you think about what Progressive has done in the industry in terms of pushing through 99% of their transactions through straight through processing and automating underwriting and changing the whole role of the underwriter where they really don't even have underwriters anymore, they got portfolio managers and relationship managers managing the bulk of business. That whole paradigm is shifting. So back to is it a hot topic? Absolutely, yes, with a bad economy, a soft market, real competitive landscape, it's absolutely essential to price appropriately,

PS: Now, what are some of the areas being invested in and especially as it relates to underwriting?

DS: Well, underwriting can be a broad topic. You can look at underwriting from the entry points so its connectivity to an agent. And then once a quote or a policy is issued then it goes to the backend to policy admin and to all the backend systems. So spending would be setting up portals -- agent portals, policyholder portals that can help facilitate the movement of data to underwriting.

It could be agent-underwriting connectivity so allowing data to be uploaded and downloaded between an agency management system and an underwriting desktop, creating an underwriting desktop, or underwriting workstation, or underwriting management system in a trend in the industry. And it can even be just leveraging BPM tools, workflows and rules engines to help streamline and automate underwriting.

We're seeing a lot of underwriting projects as it relates to data, and gathering, and leveraging external data, and market intelligence. The use of rating engines and buying rating engines to be able to have the flexibility to adjust rates and pricing, predictive analytics all the way from using insurance credit scores all the way to pretty advance predictive analytics, to automate underwriting.

In some cases, policy admin replacements so I'm a little sensitive on that one but in some cases, some companies need to that as it relates to underwriting. And the last would be enterprise content management. There's still a lot of paper being pushed in underwriting so what can be electronic, what can be scanned, what can imaged. So that's a pretty long list but there's a lot going on there.

PS: Definitely. Now, if we're currently talking about Underwriting 2.0, I bet a lot of people are wondering well, what was exactly was Underwriting 1 and what's the difference?

DS: Well, Underwriting 1.0 is where a lot of companies are today. If you think about the people, the process, and the technology of underwriting today, it was designed based on a paper, fax, phone business process with baby boomers in mind. Most of the screens and the systems had green screens and when you look at their processes in Underwriting 1.0, there's a lot of back and forth between agents and underwriters, it's through phone, and its fax and e-mail.

There's a lot handoffs when it get into underwriting. So an underwriter may have an underwriter assistant or a technical analyst and there's a lot of paper pushing and handoffs. Rating and risk of evaluation is manual, manual meaning a underwriter is still pulling data and information either on paper or on computer and manually doing the risk assessment. And then there's some documentation or automation and documentation but it's really a paper base.

And as a result, a quote could take hours, days, or weeks. So for example, Smallwood Maike is a small niche boutique player, we just have a couple of people on our payroll. And it took us two weeks to get a quote on worker's comp and it was with a top tier carrier -- one of the top tier carriers. So we had basically one type of classification and real simple payroll with not a lot two states -- really simple and it took two weeks to get a quote. So that's Underwriting 1.0.

PS: Very interesting. Now, what advice do you have for a carrier that's currently thinking about investing in underwriting?

DS: Well, the opportunities are endless and pretty exciting. What we need to do is start to look at our business processes for the new Gen-X and Gen-Y coming in. They're not going to want to push paper. They're not going to work behind a green screen. They're all about texting and everything electronic and instant and in real time. So that's the first thing we really need to shift our mindset.

Underwriters will be retiring with the baby boomers and in some cases up to 50% of the underwriters will be retiring over the next five, ten years so we got to position to attract this new generation. We need to think in terms of single entry real time upload/download like a whole loop. It all starts with agents or self-service on the internet. And when someone enters in data, it needs to be entered once, it needs to be in real time, it needs to be upload instantaneously to a carrier, the results need to be downloaded back.

We need to start thinking in terms of portals, automations, collaboration with all the web type of tools that are out there, straight through processing. Really starting to leverage external data and really think in terms of what can be automated. The other thing is there's no reason for paper folders anymore and we need to think about paperless, and electronic, and all instantaneous. So that's the ultimate vision.

PS: Excellent. Now, what advice do you have for vendors that may want to sell in this space?

DS: For vendors to sell in this space, what you really need to do is understand what some of the business problems are and really understand the processes and the connectivity between the agents and underwriters and really understand underwriters. Right now, a lot of carriers are fearful of automating something that they believe is an art when it really can be a science. So they need to have a good story, they need to have some successes and be able to talk their language.

PS: Great. Now, I recommend everyone listening to this to please checkout Deb Smallwood's excellent cover of the insurance industry on ebizQ. Thank you so much for joining me today, Deb.

DS: You're welcome and have a great day.

Announcer: This has been an ebizQ podcast.

[End of Audio]

The purpose of the SMA blog is create a dialogue around insurance transformation; launching a different perspective on linkage between strategy, process and technology choices and shifting the mindset from a technology driven approach with SOA & BPM to a business driven service-oriented thinking that creates agile and flexible new insurance business models. Look for a wide gambit of trends, research, case studies, and insights on making transformation a reality.

Deb Smallwood

"I grew up in the insurance industry and have experienced the shackles that ineffective business processes with misaligned monolithic technology solutions have placed on insurance companies...

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Karen Furtado

Karen Furtado brings a wealth of industry knowledge to SMA. She spent 25 years at CGI, focused in insurance. Her specific areas of expertise include product development, complex system implementations, vendor selection processes, project management and business and IT outsourcing services. Her passion is working with both technology providers and carriers to deliver high-value solutions for core issues facing the industry. Karen actively participates as an industry speaker.


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