Reduce Underwriting Expenses with Automated Loss History

Imagine receiving a routine commercial package submission for one proposed insured—except that the loss history includes 12 losses over a five-year period, with three carriers and three lines of business per carrier. In the hands of a superstar agent, it could take several weeks or more to manually collect this loss history—and even then, your underwriter would have to sift through reams of paper to try to make sense of it all.

You might throw your hands up and say that manual loss runs are a necessary evil. In fact, there’s a more efficient and effective way of achieving the same result: automated loss runs, enabled by a contributory database.

Automating Loss Runs with a Contributory Database

Automating loss runs can help carriers improve efficiency, enhance data quality and empower underwriters to make better decisions. The key lies in a contributory loss history database: a centralized data repository where every contributor receives real-time access to the industry-wide dataset, across all commercial lines of business. Instead of sifting through paper, underwriters can access the information they need, when they need it. And with standardized loss codes, the data can be fed into analytic engines to drive value throughout the policy lifecycle.

Automated loss runs can enable carriers to discover profitable opportunities and improve risk selection. In this article, we’ll discuss another benefit to automated loss runs: reduced underwriting expenses.

Four Ways That Automated Loss Runs Can Help Carriers Reduce Underwriting Expenses

Informed underwriting is a critical competency for carriers, but also a significant expense. Here are four ways that automated loss runs can enable carriers to reduce underwriting expenses.

1. Increase efficiency

On average, manual loss runs add 5 to 10 days to a carrier’s time to quote. Little wonder that many carriers only use them at point of underwriting—and only when they must. It’s not uncommon for carriers to proceed without loss runs for small business policies, when the premiums don’t justify the time and cost involved.

In contrast, automated loss runs help streamline the quoting process by getting underwriters the information they need, when they need it. In addition, the ease of obtaining automated loss runs makes it economically feasible to acquire them for all policies—and to use them throughout the policy lifecycle, not just at point of quote. Finally, participating in a contributory loss history database makes it much more efficient for carriers to meet their obligation of providing loss histories to requesting agents.

2. Enhance risk management

Lag time aside, manual loss runs may not provide a complete picture of the risk. Agents might not have written all the lines of business that a carrier requires, and key information can easily get overlooked in the shuffle. The worst part is, carriers have no way of knowing if they have all the information they need.

A contributory loss history database can provide historical and current information across all lines of business, including details on open reserves. At point of quote, carriers can find undisclosed risks or highlight areas for further inquiry. More broadly, they can inspect open reserves at point of renewal, or detect signs of potential fraud at point of claim. Further, carriers can leverage automated loss runs at point of endorsement—for example, to understand their risk exposure after an insured acquires another company, or to account for mid-policy changes to a commercial fleet of drivers.

3. Improve data quality

Reams of paper. Multiple, disparate data formats. Mundane data entry. When viewed through the lens of data quality, manual loss runs are highly problematic. Best-case scenario, data entry is a poor use of underwriting resources. Worst-case scenario, mistakes on the front-end can lead to mispriced business, ultimately resulting in higher claim losses.

With automated loss runs, carriers get real-time access to standardized data. This improves data quality and also enables carriers to leverage data beyond the point of quote, such as in predictive analytics, claims adjudication, policy renewal and endorsements. Further, carriers that automatically feed loss history data into rating systems can gain additional efficiencies, and reduce errors due to manual data entry.

4. Better manage talent

Underwriting talent isn’t cheap, so why are many underwriters performing data entry or shuffling paper? Given limited resources and increasing pressure to be profitable, it behooves carriers to ensure that their underwriters are doing the highest-value work possible.

By automating loss runs, carriers can triage policies by delegating simple cases to junior underwriters, and more complex policies (such as the one mentioned at the beginning of this article) to seasoned underwriters. Freed of mundane tasks, underwriters can focus on value-added activities. In addition, given the generational transition within the underwriting workforce, carriers can leverage automated loss runs to facilitate knowledge transfer between seasoned and new hires, or to attract new underwriting talent.

Looking Ahead

While manual loss runs are almost exclusively used at point of quote, automating loss runs can help carriers reduce underwriting expenses and make better decisions throughout the policy lifecycle. Automated loss runs can unlock improvements to efficiency, risk management capabilities, data quality and talent management—ultimately, helping carriers to reduce underwriting expenses.

Critically, carriers that adopt automated loss runs get more out of their human capital. When equipped with real-time, standardized data, underwriters are empowered to make better decisions, drive more value for the carrier, and work more efficiently and effectively.

To learn more about our loss history contributory database, as well as other solutions that can assist you across the insurance continuum, please visit www.lexisnexis.com/automatedlossruns.

Ernie Feirer, CPCU, is the vice president and general manager of commercial insurance for the risk solutions business of LexisNexis^®, where he is developing a suite of products and services for the commercial insurance market.

Feirer has been part of the insurance leadership team since 2000 and was named Vice President and General Manager, Commercial Insurance, in 2012. He has held roles as vice president of product management and analytics in the insurance solutions division, and vice president and general manager of the claims solutions division.