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Texas Wide Underwriting ConferenceCurrent Issues in UnderwritingBob Cicchi

Scott Marquis

Pete Morris April 5, 2011

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Industry Underwriting Topics

Simplified Issue Decision Engines Rx Database Database Mining Younger Markets Measuring Underwriter Performance Remote Underwriting Future Prospects

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Industry Trends

Simplified Issue AHOU in San Antonio last year just about every

vendor pitching a SI platform. Face amounts are getting larger: up to $500,000 Ages are getting older: up to age 65 Technology is getting better: web based platforms

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Industry Trends

Decision Engines AHOU meeting multiple decision engines Sophistication is getting better; engines

incorporate data from several sources Rx data, MIB, MVR, and other data run through

decision algorithm to render an underwriting decision.

Reinsurers appear to have bought into these engines

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Industry Trends

Rx Database More and more companies adapting Some carriers using Rx in segments of their business;

others run all their business through it Rx vendors now offering more sophisticated solutions

that assist underwriters in identifying high risk Rx patterns

Rx is at core of many of the decision engines now hitting the market

Legislation is a concern

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Industry Trends

Database Mining

Is it possible to move away from fluids and the APS? Database mining may offer the first glimpse into our

future without fluids and doctor reports What you eat, what you buy, how you spend your

leisure time, which websites you visit, how often you go to the doctor, etc, is ALL available in databases

The challenge is tying all that data into a product that will sell, minimize anti-selection and be profitable for the insurance companies

I wouldn’t bet against it!

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Industry Trends

Move away from the mature market to younger Middle Market applicants Speed and ease of purchase are key to

successfully penetrating this market segment Educational tools and online resources help tap

into younger buyers Companies rapidly embracing online community

as fertile ground to build brand loyalty with Gen X and Gen Y market segments

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Remote Underwriting

Economic downturn resulted in the loss of many underwriting positions, including some remote underwriters

This seems to have stabilized. Future will see an expansion remote

positions

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The Verdict on Remote Underwriting Helps companies reduce turnover rates. Companies are able to attract experienced, quality

underwriters Most studies have reported increased production in

remote underwriters and increased job satisfaction. Senior Management has seen the benefit of remote

underwriting and has developed a good level of comfort with the concept.

Bottom line: Remote underwriting has been successful and is here to stay.

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Future Prospects for the Underwriting Profession In the short term (2-5 years), we should see a more stable

market with fewer large scale layoffs. In long term, the demand for high quality, experienced

underwriters will increase dramatically due to retirement of our industry’s seasoned veterans (there’s a lot of grey hair at industry meetings!)

Concern should not be that there will be too many people trying to fill just a few positions, but whether or not we will have enough qualified talent available 10+ years from now.

This fact should make underwriting education a top priority for every company.

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Measuring Underwriting Performance How should we measure underwriting

performance? Increased emphasis on time-service Increased emphasis on quality

communication skills Continued emphasis on quality underwriting. What’s most important?

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Quality vs. Productivity

Which blade in a pair of scissors is most important? An underwriter who makes very high quality underwriting

decisions and fails to keep up with minimal production requirements can’t be considered acceptable in our “I need it yesterday” world.

An underwriter who is top in production, but makes poor decisions also isn’t acceptable in our “bottom line” world.

Both Quality and Productivity must be taken into account, with a bit more emphasis placed on quality.

Don’t forget the 3rd measurement of underwriting performance: Communication.

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Impact of Underwriting Engines on the Future of Underwriting

Think of these systems as “Screeners” Bottom line impact on our profession is that

underwriters will be expected to do what they are trained to do: Handle the more complex cases.

This is another case for the importance of quality continued underwriting education.

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Underwriting Engines and New Underwriters With an engine making decisions on clean cases,

how will new underwriters gain experience? In the past, Junior Underwriters handled many of

these clean cases and then progressed on to more complicated cases.

Classroom-type training is important, but nothing beats tying learning to the real world.

This will require more one-on-one mentor training.

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What does all this mean to us? Underwriting has been focused on disease The best underwriters were the ones who could pull together all

facts on a disease or condition and correctly assess that individual’s mortality

The new underwriting paradigm will focus on speed and database mining for smaller and younger applicants. Underwriters will increasingly focus on underwriting complex medical and financial cases and handling cases disqualified by decision engines.

Understanding which individuals are likely to live longer lives by looking at all available data is the next great underwriting opportunity

Hang on, the ride is going to be wild!

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Thanks!