U.S. insurance companies are being forced to hike premiums -- and face a staggering 25.6 percent, $95 billion expense ratio. Contributing culprits? Declining investment income, poor data quality, inefficient distribution and underwriting practices, and exposure to cataclysmic natural disasters and terrorism. A contributing solution? Rules-based, so-called “smart” Business Process Management.
Indeed, what’s needed to insure fast responses to changing market conditions, AgencyPort co-founder and Chief Technology Officer Eric Harnden stressed, is a best-of-breed rules system to guide BPM technology that can manage as well as automate the insurance industry’s complex business processes, at the same time eliminating many of the drawbacks associated with point-to-point, custom-coded solutions.
He explained that problems on the distribution side stem from companies “selling multiple products that sit on multiple systems in multiple distribution channels, the predominant one being the agency distribution channel. Each of these products, each of these channels, each of these tiers within the agency distribution channel bring with (them) different rules, different requirements, and different issues.” Distribution is also a very expensive, paper-intensive process handled mostly by phone, fax, and mail.
On the underwriting side, inefficiency is a hindrance and, “With the hardening market, companies are looking at how they can do a better job of managing risk. Increasingly, companies are bringing more pieces of data into the underwriting decision-making process. Some of it is internal; mostly it's external.” The fluidity of the product is another underwriting issue: “Rates change. (Insurance company) appetites (risk tolerance levels) change. And as market events occur, companies need to be able to shift their products and make changes quickly.”
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