Is Underwriting Automation the Next Big Market?
March 28, 2014
By Matt Paulson
TMCnet Contributing Writer
According to a report conducted by Strategy Meets Action (SMA (News - Alert)), an opportunity currently exists within the automated underwriting market for innovation, because insurers are increasingly realizing their dissatisfaction with existing policy administration systems. Though survey respondents reported that approximately 37 percent of the underwriting process at the average insurance company is managed through the policy administration systems, SMA has determined that the administration systems no longer meet company needs for underwriting in risk evaluation, analysis and decision-making.
A full 27 percent of commercial insurer respondents to SMA’s survey stated that they were not satisfied with their policy administration systems. This is the highest rate of dissatisfaction among all surveyed technology investments.
Furthermore, business professionals and IT managers are also butting heads over how to fix the problem. While insurance professionals feel like the ability for policy administration systems to make better data-driven decisions will increase the productivity of business as a whole, IT teams still prioritize speed as the best solution. The two metrics are somewhat contradictory, since better decisions generally take longer to process, so the industry appears to be in the need of a solution that does both.
According to Deb Smallwood, founder of SMA and author of the report, “The market is clear about the requirements for the automation of underwriting for both simple and complex risks… The biggest challenge for insurers will be to determine how to meet the underwriting automation requirements in ways that go beyond the traditional approaches.”
The survey also found that over two-thirds of insurers estimate that more than 10 percent of all technology investments over the next year and a half will be spent on underwriting, so start-up businesses that can find a good solution to underwriting automation will likely receive good investments. “The projections for technology spending on underwriting are healthy,” continues Smallwood, stating that “there is a better understanding of what is needed that coincides with a greater appreciation of what is possible.”
Edited by Cassandra Tucker
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