Follow the Rules
Commercial lines and life insurers find great value in using business rules for
Automating the insurance process is no longer the domain of personal lines carriers. Commercial lines
carriers and life insurers have been slow to adopt, but the realization that many of the tasks previously
conducted by underwriters in these lines of business can be done electronically is too valuable a service
to pass up. We asked three insurance technology experts their view on how business rules have affected
the underwriting process. Responding to our question were: Karlyn Carnahan, research director of Celent;
Bill Jenkins, founder and principal with Agile Insurance Analytics; and Karen Pauli, research director with
This month’s question:
How have business rules affected the underwriting process in
commercial lines and life insurance?
Karlyn T. Carnahan,
research director, Celent
Business rules are
heavily used in
all lines of business.
They define what
actions should be
taken depending on
the conditions or
events that occur.
Traditionally, business rules have been
captured in underwriting manuals but
carriers have been active in automating rules in recent years—especially in
personal lines where they are often used
to automate underwriting and issuance
Automation allows a carrier to apply
those rules more consistently, which
leads to better decisions, faster responses, and better customer service. It also
allows a carrier to capture the expertise
of the organization in a systematic way,
reducing the risk of knowledge loss as
key employees retire.
Managing the underwriting process
changes when carriers begin to rely
more heavily on rules. Successful use of
business rules relies upon a governance
process and an agile organization that
can change rules quickly as needed.
Bill Jenkins, founder,
Agile Insurance Analytics
The use of business
rules in the insurance
industry is not a new
fact, rules engines
have been used for
rules engines that
for underwriting decision-making were
referred to as expert underwriting systems
and were used to automate underwriting
in personal and small commercial lines.
This technology afforded carriers a
number of advantages and benefits:
underwriting consistency, process efficiencies, faster time-to-market, improved
risk selection and greater accuracy in the
pricing of a risk. As the number of insurance technical staff (underwriters and
claims personnel) began to retire and staff
shortages increased, carriers looked for
ways to capture the intellectual knowledge these individuals possess. Business
rules are seen as one means to capture
and institutionalize this knowledge.
BRE and predictive scoring address
expense reduction, profitability and cus-
tomer retention. Life carriers have begun
to use them in more sophisticated ways.
Karen Pauli, research director,
The answer is: A
lot, or not much,
depending on how
implement the rules.
have the potential
to radically change
process if an insurer embraces all the
ways rules can be implemented. Some
insurers have implemented business rules
as “knockout” rules, which miss the mark.
However, business rules can change
business outcomes, which improves how
agents, brokers, and consumers view the
insurer from an ease-of-business perspective. Business rules are already being
used for small commercial lines at some
insurers, but business rules adoption
can bring value to all commercial lines
Recently, some life insurers have
brought business rules into the underwriting process for basic life policies, but
opportunity abounds in the life space.
One caution: Regardless of industry segment, business rules adoption does not
replace analytics and models adoption—
they need to be teammates.