From paper to pixels: the benefits and challenges of digitizing underwriting processes

Insurance providers have been using manual processes for data intake for decades, including pen and paper forms, PDF forms, and agent-assisted data entry. So, why change now? The answer is simple. The insurance market is more competitive than ever before, and manual data intake can have a significant impact on the efficiency, accuracy, and scalability of the underwriting process. Let’s look at why that is. 

The impact of manual data intake on underwriting

It’s time-consuming and inefficient. Manual data intake requires significant time and effort, which can slow down the underwriting process and delay policy issuance. This, in turn, leads to unhappy customers and limits the number of policies an individual underwriter can handle. In addition, manually-collected data is often siloed, and one part of the organization can’t see the data used in other departments or business units. That often results in duplication of effort and increased administrative costs, as well as additional customer frustration, as the customer is asked to provide the same information repeatedly, in every interaction with the insurance provider. 

Manual processes are error-prone. With manual data intake, there is no way to verify information in real time, and forms are often submitted with incorrect or incomplete data. This can lead to delays if the errors are caught in time, or to inaccurate risk assessment and pricing if they are not. 

It limits data analysis and management. Manual data intake can limit the ability of underwriters to analyze large volumes of data and identify patterns and trends, which can lead to suboptimal risk assessment and pricing decisions. As the volume of data increases, manual data intake can become even more challenging to manage, which can limit the scalability of the underwriting process.

Potential benefits of digitizing the underwriting process

It’s clear that manual data entry is far from an ideal solution for underwriting. Luckily, digitization offers a better alternative. By automating data intake through digital tools and technologies, insurers can improve the speed and accuracy of underwriting decisions, reduce errors, and enhance the overall customer experience. Some of the key potential benefits of digitizing the underwriting process include: 

Increased efficiency and accuracy

Digitizing the underwriting process can help streamline workflows, automate routine tasks, and reduce manual errors. This can lead to faster processing times and improved productivity, as well as reduce the costs associated with underwriting processes, such as paper-based documentation, manual data entry, and administrative overheads. In addition, digitization can help ensure that underwriting decisions are based on accurate and up-to-date data, reducing the risk of errors and fraud.

Better risk assessment

With digital data intake, data is standardized throughout the organization and accessible to all stakeholders. That allows insurers to leverage advanced data analytics and artificial intelligence (AI) tools to analyze large volumes of data and identify patterns and trends. The insights created through this type of analysis can help insurers make more informed decisions about risk assessment and pricing, and respond more quickly to changes in the market, customer needs, and regulatory requirements.

Enhanced customer experience

The days in which customers stuck with the same insurance provider for decades are gone. Insurance consumers are savvy, and they expect their providers to offer the seamless, digital  service they have grown to expect in other domains, including easy access, from any device, at any time. When insurance providers can’t offer them that, they look elsewhere. In fact, according to PWC, 41% of consumers said they would be likely to switch providers due to a lack of digital capabilities. 

Adopting digital underwriting processes can help insurers meet changed customer expectations and provide more personalized and frictionless service, including real-time quotes and policy recommendations. 

How do regulatory factors and compliance requirements figure in?

Underwriting is subject to a variety of regulatory and compliance requirements designed to protect consumers and ensure that insurers operate in a fair and ethical manner.  For example, underwriters must ensure that their practices are fair and non-discriminatory, and cannot use factors such as race, gender, or ethnicity in determining eligibility or rates. They must also conduct a thorough assessment of the risk involved in insuring a particular individual or entity. This includes evaluating factors such as age, health status, driving record, and credit history.

Insurers are typically required to provide clear and accurate information to policyholders about their underwriting practices, rates, and policy terms. This helps to ensure that consumers are able to make informed decisions about their insurance coverage. They are also required to have effective anti-fraud measures in place to prevent fraud in the underwriting process. This can include verification of information provided by applicants, as well as monitoring for suspicious activity.

Last but not least, underwriting processes must comply with data privacy regulations, such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). This includes obtaining consent from policyholders to collect and use their personal information, as well as implementing appropriate data security measures. Compliance with these regulatory factors and requirements is essential for insurers to maintain their license to operate, avoid legal penalties and fines, and uphold their reputation and trust with customers. 

Digitization can help insurers meet these strict and constantly evolving regulatory requirements. With the right platform, insurers can feel confident that customer data is stored safely, and e-signature and data verification tools can help them meet a variety of regulatory requirements, while also maintaining transparency about processes and procedures. 

Why are analytics important in underwriting? 

Digitizing the data intake process allows insurers to leverage data-driven models and machine-learning algorithms that analyze large amounts of historical data quickly and accurately. This type of data-based analytics can provide valuable insights that help insurers to make accurate and informed decisions, such as the likelihood of a policyholder making a claim and the potential cost of that claim.

Accurate risk assessments help underwriters avoid underpricing or overpricing policies, which can lead to losses or missed business opportunities. Analytics can also help insurers identify and select the most profitable risks to insure while avoiding those that are likely to result in losses. This can lead to better underwriting results and more profitable business.

Last but not least, analytics can help insurers to personalize their products and services to better meet the needs of individual customers. By understanding customer behaviors and preferences, insurers can tailor their offerings and pricing to provide better value and improve customer satisfaction.

Selecting the right technology

When selecting a technology platform, it’s important to choose one that provides solutions for the unique challenges of underwriting and gives you an edge in an increasingly competitive insurance market. Digital technology for underwriting should eliminate any need for manual data entry, and feed data directly into underwriting systems. Without manual touchpoints, the potential for error is significantly reduced and accuracy improves. The right digital data intake solution can also automate parts of the underwriting process while still remaining compliant with strict regulations, for example, collecting e-signatures from policyholders or requesting supplemental documentation and information. 

When data is digitized, all stakeholders can access it easily, preventing the siloing that leads to duplicated effort and unnecessary delays. Underwriters can save time and energy, while making sure that customers pay a fair rate for coverage, and avoiding costly mistakes.