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A new way of thinking: online technology is not just for administrative tasks anymore. Insurers are now beginning to use it for more complicated parts of their businesses. (Information Management: Industry Strategies).

Article Excerpt
Medical interviews have long been a tedious part of the life insurance underwriting process, but Beneficial Life Insurance Co. has found a way to expedite the process, relieve agents of the interviewing responsibility and remove redundancy in data entry--all through a Web-based tele-underwriting system. And the company estimates the new system saves about $25 per interview, or about $15,000 a month.

Beneficial's system is part of a new level of technology among insurers. Using Web-based technology to automate administrative tasks has been routine procedure for many insurers. Now, some are taking the next step by applying technology to the cognitive parts of their businesses--the underwriting of complex risks, better and faster management of claims, and the making of strategic decisions that determine a company's future viability.

For the industry, it is a new and bold direction with its own set of cost/benefit risks. It runs counter to criticism that the industry is slow to adopt technology.

"You could say insurance companies are behind the times because of their risk-averse nature," said Jamie Bisker, director of research for the insurance practice of the Tower Group. "But the reality is they're not dumb or slow, but rather can't proceed as quickly as they'd like." The Tower Group is a research and advisory firm based in Needham, Mass.

Contrary to common belief, insurers are aware of every piece of technology that comes along, Bisker said. The sheer complexity and variety of their businesses, however, may serve to discourage insurers from making wholesale technological changes. Instead, they implement the most advanced technologies for "pinpoint uses," such as personal lines within a single state, Bisker said. "Technology creeps its way into carriers, an evidence of their pragmatism," he said. He estimates that 62% of carriers use technology for underwriting at least one line of business, particularly personal lines, auto and term life.

While use of technology so far has improved efficiency, Bisker says the newer cognitive uses are a "generational change." They employ artificial intelligence, including case-based reasoning, customized underwriting, fraud recognition and better claims services.

Electronic Thinking

According to Bisker, case-based reasoning draws upon data to determine whether a new case is similar enough to others on the books so that it can be underwritten the same way. This type of artificial intelligence makes decisions automatically--a good use in jet-underwriting systems, for example--and frees up underwriters for more difficult cases. In novel cases, underwriters report the data so that it can form a new category and be leveraged later. Bisker said case-based reasoning also eliminates human inconsistency in judgment and human errors when case information has to be manually recorded more than one time.

Customized underwriting allows development of coverage based on the circumstances of an individual. Before artificial intelligence, such...