By KELLY LYNCH, senior director, underwriting sciences, with FirstBest Systems in Bedford, Mass.
International accounting and consulting firm Deloitte LLP estimated that the insurance industry must hire and develop 25,000 new underwriters alone between 2004 and 2014. A 2010 McKinsey report stated that the number of insurance workers 55 or older has increased by 74 percent in the last 10 years, compared with a 45 percent increase for the overall workforce.
For the insurance underwriting community, these figures underscore how important and urgent the need is to collect, preserve and share decades of experience as professionals retire. Top-performing experienced underwriters, who often operate by experience and instinct, can threaten the loss of best practices as they retire.
Insurers need to appeal to Generation Y to replete the ranks. And as they do and the generation gap in the makeup of underwriters widens, the industry needs to leverage some type of system to capture the experience and best practices of senior underwriters in order to train and empower young underwriters. The big issue, however, is that these Gen-Yers tend to gravitate toward companies that do things faster, smarter and easier with technology enabling real-time collaboration and Web 2.0-based processes.
There are ways to bridge the generation gap, while giving recruiting and training a boost and ensuring that the knowledge of the best underwriters is preserved. Before we delve into solutions, though, we must fully grasp the nuances of this challenge.
At the 2010 annual conference of the National Association of Mutual Insurance Companies, Julian Pelenur of FirstBest Systems delivered a presentation about the issues noted above and asked attendees to complete a brief survey about the talent crisis, staff development and training. Responses revealed the fact that most carriers still rely on manual methods for training and knowledge sharing, and the challenges to overcoming this tradition.
When asked about their greatest concern for hiring and educating new underwriters in the near term, 35 percent of attendees cited "ongoing training, underwriting skills and knowledge sharing." Nearly as many noted "finding and attracting qualified applicants" as a concern. Regarding best practices for training and sharing among team members, 38 percent cited "weekly meetings" and an equal amount said "ad hoc collaboration and information sharing." Some even admitted to using paper-based internal manuals.
Few respondents had leveraged technologies that truly facilitate real-time training and collaboration to capture underwriting expertise for knowledge-sharing purposes. Instead, intranets, shared drives and other pre-Web 2.0 technologies appear to be serving as workarounds.
CROSSING THE GENERATIONAL DIVIDE
When comparing baby boomer underwriters with the next generations, a few differences stand out. Gen-Y has radically different expectations when it comes to real-time access to information and real-time digital contact and connectivity with people. Gen-Y underwriters don't use pen and paper the same way as their predecessors or make nearly as many phone calls--and they don't send faxes.
Even if we could box up all the veteran underwriter knowledge for the next generation, the box would need to be in a usable and attractive medium for Gen-Y and other workers.
To be appealing and useful, knowledge should follow the four As by being:
-- Accessible: be omnipresent, in real-time, from anywhere
-- Applicable: offer relevant data within the context of the task (thank you, Google)
-- Adaptable: guide workers through a process, depending on what they are trying to accomplish and based on the user's experience level and stage of the workflow
-- Auditable: give real-time assurance about how data was used or is being used
A combination of these approaches can transform the process and help solve these challenges in a unified, holistic manner. Strategies range from automating routine tasks to capturing the knowledge of experienced underwriters as a valuable asset, so that less experienced underwriters can perform more like seasoned underwriters. A cardboard box won't do.
COLLABORATIVE TECHNOLOGY CAN HELP
Companies can capture their experienced workers' valuable knowledge--and make the job more exciting and attractive to the younger generation--with a simplified, automated and modernized process that remains relevant as attitudes and expectations evolve. A "collaborative knowledge system" is a practical approach to solving these challenges. The concept has three key functions: automation, knowledge management and collaboration.
Automation. There is a lot of talk about commercial-lines automation, but the term remains vague. One can't open an insurance magazine today without seeing a drumbeat of news about carriers' strides toward automation and how agents are driving more business to carriers that have invested in meaningful automation, with risk appetite, prequalification, fast quotes, and straight-through-processing (STP).
STP allows the agent access to the quote, and often binding of coverage, without underwriter involvement. STP will never fully replace the person in commercial-lines underwriting, but it does make sense for small risks or those that fit within a well-understood class, where the outcome is relatively predictable. If a carrier has a proven underwriting formula, why make an underwriter manually slog through thousands of small, non-complex homogeneous risks? A system should manage the entire underwriting workflow, powered by robust business rules, so it's easy to transform underwriting knowledge into automated rules and workflows that do the work.
But automation is not just STP. Automation can also free up underwriter time by gathering all the data needed, validating or pre-filling the application, or even screening, clearing, and assigning risks to the right person. For larger commercial lines, these efficiencies create a very compelling return on automation.
Knowledge management. We already painfully understand the growing gap in underwriting knowledge and the importance of capturing and preserving experience. Now we need to teach new recruits. To achieve this goal, carriers must develop knowledge-sharing platforms to deliver best-in-class solutions.
Carriers need specific tools to capture, share and teach best practices and underwriting knowledge to less experienced underwriters. One way is through underwriting checklists. The experienced underwriter can "teach" the system by entering a specific checklist item and correlating that checklist item to a characteristic of the risk via a business rule. After time, the carrier builds a knowledge base of checklist items and their associated rules. As a new underwriter tackles the risk evaluation process, the system continually guides, prompts and warns of conditions matching a specific checklist flag. The system can also stop the user from going past a point in the workflow without further evaluation.
This also ties to an underwriter's letter of authority. An underwriting system should continually compare the risk being written with the underwriter's authority levels, noting where a referral is needed. As underwriters gain experience, the carrier can adjust authority thresholds to reduce the burden of clearing referrals and oversight.
Last, carriers should track underwriter effectiveness, from an efficiency perspective as well as the quality and accuracy of the risk evaluation. In addition, carriers may even track pricing accuracy and key ratios such as hit ratio and loss ratio. The system should store this data to allow for continuous measurement of the impact on different aspects of the process and make improvements where most needed.
Collaboration. It's critical for carriers to use a collaborative platform for shared learning and team underwriting. The collaborative platform helps less experienced underwriters gain the knowledge they need, wherever it resides.
For example, real-time chat could help younger or less experienced underwriters tap into the expertise of senior underwriters, mentors and other members of the underwriting team such as loss control and claims personnel.
Team members should also be able to leave notes in context and attach documents to their underwriting file for immediate access and action by the appropriate resources.
Real-time collaborative tools enable all underwriters to harness the collective knowledge of an extended team, regardless of location and, of course, in real time.
The shortage of qualified and experienced underwriters is growing as senior underwriters retire. It is keeping carriers up at night and driving industry attention. However, outright insomnia is needless. New, collaborative underwriting systems not only appeal to Gen-Y recruits, making insurance a more alluring career, they also capture knowledge and put checks and balances in place to ramp and assist new underwriters. Carriers can then deliver more efficient and profitable business no matter the average age, or experience of their staff.
October 15, 2010
Copyright 2010© LRP Publications