Insurance underwriting software is mainly for companies, brokers, and large insur-tech organizations to help them automate the manual process of determining who to give insurance to and how much.
Insurance is a critical commodity in today’s fast-paced economy and minimizes the risk of many things, including one’s life. As the demand for insurance increases, the evaluation process has drastically changed. Earlier, the underwriting process was done manually. This was a time-consuming, inconsistent, and error-prone process.
However, with artificial intelligence and data analytics, insurance underwriting tools have taken over the market and made the process accurate, efficient, and legally compliant.
With a varied range of insurance underwriting software in the market – each with its own set of features – it becomes quite challenging to choose one for your needs. In this blog post, we will clear that confusion and list five important features that must be present in your insurance underwriting tool.
But before understanding the features, let us briefly recollect what is an insurance underwriting platform and why it is so essential.
What Is Insurance Underwriting Software and Why Is It So Important?
An insurance underwriting tool helps an insurance company assess the risk to understand if it will insure it and, if yes, at what price. The process, which was done manually earlier, is now automated. The platform evaluates several factors in the underwriting process, like personal information, type of insurance opted for, financial history, and much more.
Underwriting is critical for all insurance companies – big and small – as it helps maintain a healthy loss ratio. This tool is one of the main drivers behind a company’s financial performance as it helps prevent the risk of high loss ratios for insurance companies.
Top 5 Features To Look For In An Insurance Underwriting Software
There are scores of features for an insurance underwriting tool, but mining out the right ones is the key to investing in the right software. Here are five must-have features in any insurance underwriting tool.
#1 Risk Assessment Through Automation
Insurance underwriting tools use data analytics and algorithms to assess the risk of insuring individuals or assets. This automated process saves time and cuts down the risk of human error. The decisions are made based on the available data and predefined criteria the insurance company has set.
Let’s understand the features with the help of an example. Suppose you are a car insurance company and receive an application for the same. To assess the risk level, the underwriting platform will automatically check the applicant’s driving record, age, car model, and financial records. So, if the applicant has several speeding tickets to their name then the risk and premium both increase.
#2 Tailormade Underwriting Rules
Each insurer has their own set of rules and regulations to abide by. Based on the company’s risk appetite, you can set and adjust your underwriting criteria with these tools. So if your business strategy calls for high-risk insurance, you can set the criteria on the same lines in the software.
For instance, you want to focus only on low-risk insurance applicants and adjust the underwriting software to prioritize those customers. So, applicants with serious illnesses will automatically be rejected when they apply.
#3 Seamless Data Integration
Ensure that the underwriting tool you choose can pull data from various sources like public records, internal databases, and third-party data providers. This helps create a comprehensive applicant profile that assists in the evaluation process.
Let’s say you receive a home insurance application. In this case, you have to see if the insurance underwriting tool can source information from credit score databases, the weather report of the area, and the financial health of the homeowners to evaluate the risk.
#4 Compliance With Regulations
Staying in line with local and international compliance and regulations is a legal requirement for all insurance companies. So, ensure that the software you choose helps you comply with the state laws and regulations and avoid the risk of accumulating non-compliance penalties.
The best way to make sure that the insurance underwriting software stays compliant at all times is to check how often it gets updated.
#5 Detecting Fraud Applications
Lastly, the tool you choose must have fraud detection capabilities to save you from potential loss. The best of underwriting platforms come with in-built tools that analyze inconsistencies and patterns in the application data and flag down such requests as a no-go.
For instance, the software you choose might detect mismatches in the medical history provided on the applications with the medical records pulled from a public healthcare portal. Such inconsistencies are suspicious as they indicate the application of multiple policies within a short time.
A human could have done the same job, but it would have taken a lot of time and there is always the risk of error. With insurance underwriting software you not only reduce error risk but also save a considerable amount of time.
In Conclusion:
Insurance underwriting is a unique but critical process. The varying range of risk makes this process all the more difficult. However, the right software will cut through the complexities and ensure that it does the job well to maintain the company’s profitability.
However, you must ensure the application process is detailed and thorough, as the amount and quality of information fed to the underwriting software will directly influence the process.
