As insurance underwriters are called upon to do more, automation and lean processes -- such as decision support analystics -- are the keys to boosting effectiveness and efficiency.

1. Unlocking the Performance Levers
of Commercial Underwriting
Equipping underwriters with the right tools can transform this critical
function and result in significant savings in cost, time and effort.
Executive Summary
As insurers face tremendous pressure to improve
their financial performance amid rough global
economic weather, efficient risk selection and
accurate pricing have become even more critical.
However, most commercial insurers go about
these processes in a haphazard, labor-intensive
and nonstandardized manner. Underwriters spend
an unjustifiable amount of time dealing with
unclear workflows, lack of relevant information,
multiple systems that require rekeying of massive
amounts of data and, most important, the lack of
powerful tools that they need to take meaningful
decisions. Experienced underwriters spend their
valuable time compensating for the process and
system deficiencies instead of analyzing risks.
This white paper analyzes the strategic objectives
of commercial lines carriers that might warrant a
change in the way underwriters have worked for
decades.
Underwriters’ Need for
Technology Support
To understand the dilemma that an underwrit-
er faces every day, let us consider how Dave, a
seasoned underwriter, allocates his time each day.
With about a dozen submissions to underwrite
every day, Dave has to reference guidelines, pull
data from multiple sources, communicate with
multiple departments to seek data points, enter
data into various tools and seek and analyze
the output, exchange data with brokers through
phone/email and execute intermittent requests
from brokers, internal customers, etc.
He has to finish these tasks while retaining focus
on his core task, which is to strike a balance
between the quality of risks undertaken and
getting new business.
Today, he had almost finished preparing a quote
for an important client, Zeon Broking, after two
days of hard work, when Zeon’s broker called him
with some changes in the commercial auto line
application. The broker wanted the revised quote
on the same day. Noncompliance with the request
would mean risking losing the client’s business.
The change appeared to have caused the risk
to increase but calculating the magnitude of the
increase would take time.
In roughly four out of every five submissions,
Dave faces this challenge — to strike a balance
between quality and speed. A compromise in
quality could lead to winning the business but
risking a potentially large claim that would result
in deterioration in the loss ratios. On the other
hand, focusing too much on quality could result
in losing business.
• Cognizant 20-20 Insights
cognizant 20-20 insights | april 2013

2. 2
In commercial lines businesses, automation can
by no means replace the underwriters’ acumen
and no amount of rules can substitute for the
experience of a seasoned underwriter. Technology
should rather be aimed at offering strong support
to underwriters. That said, there is significant
potential for technology to assist the underwriter
in her job. This is not only because underwriting in
commercial lines (with the exception of casualty
and small commercial business) has largely been
untouched by the technological advancements
that policy admin or claims have witnessed in
the past decade, but also because the role of an
underwriter is undergoing a sea change.
While many insurers have invested in tools
ranging from workflow solutions to drive the new
business process to telematics to improve loss
control, what is lacking is an integrated approach
to improving underwriting operations. The
carriers that adopt this strategy early will over
time build the most profitable books of business.
Small Improvements Can
Yield Large Gains
In recent years, returns on investments have
been declining and large-scale global losses due
to natural disasters have made carriers increas-
ingly dependent on underwriting for revenues.
Even though the commercial insurance industry
is seeing an upward trend in premium volumes,
the market continues to be uncertain and the
global economic conditions unpromising, making
underwriting excellence a top priority for carriers.
Since many insurance products have been com-
moditized over the years, leaving few opportuni-
ties for carriers to differentiate their products,
improvements in risk selection and pricing can
result in large increases in revenue and prof-
itability. Figure 1 highlights the impact better
underwriting would have on various parts of an
insurer’s financials. Even a marginal improvement
in the selection of risks can have a tremendous
impact on loss expenses. The quality of under-
writing here refers not only to the right risk but
also the right price for the right risk. While better
risk selection is a powerful lever, the benefits
of efficient underwriting should not be under-
estimated. And although better discipline and
efficiencies will result in reduced underwriting
expenses, improved selection of risks to assess
would lead to improvement in the net underwrit-
ing income.
For example, let us consider an insurer with
$4 billion in written premium, and $3 billion in
incurred losses. If better and consistent selection
of risks results in even a 1 percentage point
improvement in the loss ratio, it could lead to
savings in the range of $40 million. Similarly,
through better selection of risks to assess, if the
insurer is able to improve the written premium by
2% it would result in a benefit of $80 million. This
illustrates the impact underwriting processes
have over the insurer’s financials compared to
areas such as claims where technology can strive
to achieve only cost saving and not compelling
top-line benefits.
Figure 1
Potential for Increasing Underwriting Efficiency and Effectiveness
100 %
65%
11%
22%
2%
Premiums Losses Incurred
Quality (Effectiveness)
Speed (Efficiency)
Underwriting
Expenses
Incurred
Loss Expenses
Incurred (Allocated
and Unallocated)
Net Underwriting
Income
cognizant 20-20 insights

3. Underwriters Are Being Called
Upon to Do More
Underwriting has traditionally been a mixture of
art (as underwriters often argue) and science (as
technologists often believe). However, in recent
years a new dimension has been added to the
underwriter’s role.
Underwriters now have to play the larger role of a
risk consultant. The changing paradigm requires
that underwriters spend less time handling sub-
missions, which currently take up a major chunk
of their day, and invest that time in developing
relationships with agents, acting as an advisor
to clients and participating in organizational
activities such as product development and
portfolio analysis.
This agenda has to be tackled in a comprehensive
fashion because the levers that can free up the
underwriter’s time are hidden in several places.
As Figure 2 indicates, underwriters are involved
in several activities that do not require their
expensive time. These tasks can be de-skilled into
chunks that can be packaged and completed by
the underwriter assistant or by a remote coun-
terpart or a remote support group. Such a group
can even share the support tasks for a group of
underwriters, thereby achieving reduced labor
costs, better economies of scale and more con-
sistency in the way these tasks are executed.
Some smaller insurers have implemented this
approach successfully, leaving their underwriters
with more time to deepen their relationships with
their brokers. These relationships, in turn, foster
premium growth and strengthen the insurers’
position in price negotiations.
The role of the underwriting support group — the
underwriting assistants, raters and operations
assistants — is also undergoing a change. Many of
their activities will soon be consolidated and cen-
tralized for economies of scale with niche groups
taking on work that requires specialized services.
In some cases, this consolidation could be followed
by de-skilling and outsourcing of the support
services that do not require physical proximity to
the client and the underwriter. In the past, de-skill-
ing and centralization of support activities were
motivated primarily by cost saving via operations
efficiency. However, even insurers that do not have
underwriting expense reduction on their agenda
might consider this option to ensure consistent
application of business rules across the board.
3cognizant 20-20 insights
Figure 2
Underwriters’ Changing Responsibilities
Risk selection, manual rating and pricing
Submission handling, data cleanup
and research of insured
Negotiation and dealing with agency issues
Post binding services
Product development
Agency relationship/marketing
Portfolio/territory analysis
Risk consulting
35%
25%
25%
15%
10%
10%
15%
5%
10%
25%
15%
10%
Figure 3
Shifting Roles at Insurers
Underwriters
Underwriters to take up
additional roles such as
marketing representative,
risk consultant, portfolio
manager and product
development.
Underwriter
Assistants
With the advancement of
technology and outsourcing/
offshoring, the work done
by UAs will be automated
or outsourced and some
will be retained for career
development.
Policy
Servicers
With the advancement of
technology and outsourcing/
offshoring, the work done by
policy servicers (including
raters) will be automated or
outsourced.

4. cognizant 20-20 insights 4
Quality of Underwriting Can Be
Improved While Decreasing Cost
of Operations
In a typical middle-market business unit, only a
small percentage (roughly 8%) of the submis-
sions make it to the issuance stage. Our analysis
indicates that about 90% of the underwriter’s
effort/time does not translate into business for
the company. On average, an underwriter spends
eight days on a risk submission for insurance
coverage, and of the submissions he works on
70% are declined before the quote is generated
and presented to the agent. When it comes to a
specific submission, the underwriter spends a
lot of time waiting for his support staff to do the
prep work, or for the agent/broker to provide the
information he needs. Also, a significant amount
of time and effort is expended in entering the data
in the multitude of systems that the underwriters
use as well as in handling the human errors made
in the data entry process.
Clearly, much time is wasted in the current state
of operations, and there is significant potential to
increase the quality of the decisions made. It is
evident that at each stage of the process, system-
assisted improvements can improve efficiency
and effectiveness.
There are several areas in the underwrit-
ing process where the levers of leanness, and
automation can be applied to achieve significant
efficiency. This gain can, in turn, be invested to
improve the quality of the underwriting as well as
increase the number of submissions processed.
Figure 5 (on the following page) illustrates that
through automation and lean processes, the
submission to quote ratio can be improved by up
to 10 percentage points and the quote to issuance
ratio can be improved by up to 6 percentage points.
By reducing the reentering of data in multiple
systems, and with improved task management
and submission routing to the underwriters, the
turnaround time can also be reduced from eight
days to as low as 4.6 days. De-skilling of tasks can
significantly reduce the average effort in terms of
full-time employees (FTEs).
Role of Technology: Automation and
Decision Support Are Key Levers
The insurance market follows a sinusoidal cycle,
with the industry facing losses and profit alterna-
tively. This market dynamic makes the job of an
underwriter more difficult because he needs to
follow the pulse of the market very closely and
maximize profits during a boom and minimize
losses (if not make a profit) during down cycles.
To be able to do this, the underwriter must be
equipped with a system that not only provides the
right data at the right time but also the right tools
to use the data to take the right decisions. While
process rationalization through automation is
the only sustainable way to achieve the former, a
robust decision support system developed using
various analytical models enables the latter.
Flexibility in the system and processes will enable
an organization to distribute the tasks effectively,
attain the desired financial objectives and monitor
the underwriting activities closely and accurately.
The initiatives listed under the automation and
decision support levers in Figure 6 (on page 6)
are not independent of each other, and they will
deliver the best results for the organization when
built on an integrated platform.
Figures based on Cognizant research.
Figure 4
Time and Effort Allocations in the Insurance Process
Data
Entry
Submission Intake Bind and Issue
Pricing Quote IssueInitial Rating
100 88 58
27 8
Proposal Creation
Pre- and post-underwriting processes
Core underwriting processes
Varies
Submission Intake Create Proposal
2 X hours73.3
Average Number of
Submissions that Pass
Each of the Stages
Average Lapsed Time
Average Effort in FTE
Preliminary
Evaluation
Risk
Evaluation
Duplicate
Submission
2.5 days 4 days 1.5 days

5. cognizant 20-20 insights 5
For instance, consider “rule-based selection on
submissions to quote.” By building this capability,
we achieve positive impact on many levels
and different kinds of benefits. This capability
improves efficiency by letting underwriters
work on submissions that have a higher prob-
ability of being qualified and quoted. It improves
the scalability of the underwriting organization
by auto-declining the poorest of those submis-
sions, thereby freeing up underwriters’ time and
enabling them to work on a larger set of submis-
sions. It also becomes a decision support tool by
automatically filtering bad risks.
Technology also needs to be intelligent enough
to overcome any catastrophic event and trigger
stop loss across the system. For instance, if a
particular zone is set to face a tornado or is
already weathering it, then the system would
automatically refuse to underwrite submissions
from that region.
Undertaking one small initiative at a time has
been the norm in the underwriting technology
landscape so far. However, except for a few
carriers, such an approach leads to benefit
leakage. For instance, analytics has been
trumpeted as the single most important factor for
improving underwriting effectiveness. While this
is true in theory, when it comes to executing the
idea IT departments always stumble over having
to integrate the large volume of historic data into
a single source of truth and develop a mechanism
to collect and record data in a systematic way.
While the former can be achieved with some
difficulty, the latter is not possible without an
integrated platform with a rationalized process.
Conclusion
Commercial underwriting is unlike other
processes in the insurance industry in that it has
an extremely complex and non-standard process,
requires different types of skills, uses mostly
unstructured data and is highly dependent on
human judgment. Perhaps due to these very
reasons and the strong belief until recently that
this is a process that is not conducive to techno-
logical intervention, commercial underwriting has
lagged behind in technology-based process mod-
ernization.
• Compared to other core insurance processes,
small improvements in underwriting can lead
to tremendous benefits both on the top line and
bottom line of the insurer. But to transform the
operation, carriers should be clear about what
their strategy is and the business objectives
that can be derived from the strategy.
• The work profile of underwriters is changing
as market volatility has become the new
normal and is something that they have to
deal with on a daily basis. This change will
cause underwriters to spend less time on
their traditional submission management
tasks and more time on relationship
management and fulfilling the role of a risk
consultant to their key clients. Systems need
to quickly catch up to enable underwriters to
shift gears.
• The quality of underwriting can be improved
while reducing the cost of operations. That
is, contrary to conventional wisdom it is not
necessary to tackle these two imperatives
Figure 5
Improvements Derived from Automation and Lean Processes
Issue ratio improved by up to
6 percentage points
through better selection of
submissions to quote.
Turnaround time reduced
from 8 days to 4.6 days
through various automation
initiatives.
Total effort reduced by
42.3% through automation,
de-skilling and availability of
decision support tools.
Submission Intake Bind and Issue
Quote Issue
100 88 58
37 14
Pre- and post-underwriting processes
Core underwriting processes
Varies
Rate and Price Create Proposal
0.8 X hours4.22.1
Average Number of
Submissions that Pass
Each of the Stages
Average Lapsed Time
Average Effort in FTE
Submission
1.6 days 2.4 days 6.0 days
Number of quotes increased
by up to 10% through
automation.

6. cognizant 20-20 insights 6
separately. In fact, the benefits will be greatest
when they are approached in an integrated
manner.
• The primary levers of performance in
commercial underwriting are automation and
decision support. Technology can play a signifi-
cant role in tapping these levers.
In recent years, many insurers have ventured
into this area but without much to show for their
efforts. Dealing with such a complicated setting
in a tactical way means that at every tactical step
critical details are overlooked. These may not
affect the particular phase or process in question
but may have negative effects on several other
parts of the process. Every misstep in underwrit-
ing modernization has a particularly negative
ripple effect, considering the profile of the
primary users and their traditional resistance to
automation.
The answer lies in undertaking a deep analysis
of the current problems and assessment of the
specific drivers for modernization, which may vary
by insurer and strategic thinking about execution.
Adopting this mindset while embarking on the
modernization will reap measurable top-line
and bottom-line benefits for the insurer. It will
also position them to quickly adapt to industry
dynamics, be it a soft or a hard market, and to
deal with the entry of new technologies or even
a corporate imperative to broaden the range of
products or markets.
Figure 6
Automation and Decision Support Initiatives Cause Multipronged Impact.
Initiative
Impact
Efficiency Responsiveness
Decision
Support
Scalability
Automation
Automation of workflow.    
Skill-based routing, work assignment and forecasting. 
Automatic document generation from repository of
templates.

Automatic archival and retrieval of records, and triggered
correspondence of documents.

Rule-based selection on submissions to quote.   
Centralized availability of latest account information through
integration of data and documents.
 
Ability to support multiline core processing status reporting. 
Multiline, real-time rating.  
Documentation of UW thought process.  
Automation of binding, policy issuance, and service setup. 
Context-sensitive help/underwriting guidelines.  
Decision Support (Analytics)
Systematic evaluation of risk appetite. 
Automatic selection of policies to pursue for renewal.  
Models to improve accuracy of pricing decisions. 
Models to improve the selection of submissions to quote.  
Product design through analysis of customer
segments and needs.


7. About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-
sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in
Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry
and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50
delivery centers worldwide and approximately 156,700 employees as of December 31, 2012, Cognizant is a member of
the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing
and fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.
World Headquarters
500 Frank W. Burr Blvd.
Teaneck, NJ 07666 USA
Phone: +1 201 801 0233
Fax: +1 201 801 0243
Toll Free: +1 888 937 3277
Email: inquiry@cognizant.com
European Headquarters
1 Kingdom Street
Paddington Central
London W2 6BD
Phone: +44 (0) 20 7297 7600
Fax: +44 (0) 20 7121 0102
Email: infouk@cognizant.com
India Operations Headquarters
#5/535, Old Mahabalipuram Road
Okkiyam Pettai, Thoraipakkam
Chennai, 600 096 India
Phone: +91 (0) 44 4209 6000
Fax: +91 (0) 44 4209 6060
Email: inquiryindia@cognizant.com
­­© Copyright 2013, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any
means, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein is
subject to change without notice. All other trademarks mentioned herein are the property of their respective owners.
About the Authors
Jenny Nirmala Karuna Manoharan is a Senior Manager within Cognizant’s Insurance Practice. She
has over seven years of experience in business and IT consulting in the property & casualty insurance
industry. She has worked with several U.S.-based and global carriers to develop modernization strategies
and helped design and develop state-of-the-art underwriting platforms. Jenny holds a post-graduate
diploma in business management from T. A. Pai Management Institute, Manipal, and a bachelor’s degree
in engineering from Bharathiyar University. She can be reached at Jennynirmala.Karunamanoharan@
cognizant.com.
Soumya Ranjan Dash is an Associate Director in Cognizant’s Insurance Practice. He has over nine years of
management consulting experience in the insurance industry. Soumya has advised senior management
of insurance companies on strategy, operations and technology issues such as underwriting roadmaps,
claims process reengineering, policy administration application roadmaps, e-commerce strategy, post-
merger IT integration, business intelligence strategy and operations improvement. He has a post-gradu-
ate degree in management from the Indian Institute of Management, Calcutta, and a bachelor’s degree
in engineering from the Indira Gandhi Institute of Technology, Sarang. He can be reached at Soumyaran-
jan.Dash@cognizant.com.