ITA Pro Magazine - December 2014

loss control or premium audit, will create the best results. It’s about making those decisions not just based on an account’s premium size, but on its individual characteristics,” Carnahan says.

“Analytics are being applied more in commercial lines to send up red flags for things that underwriters might not see—not because they aren’t skilled, but because the human brain can only look at so many different elements at one time,” Smallwood says.

Hawaii Employers’ Mutual Insurance Company (HEMIC) has deployed a combination of straight-through processing and underwriting workstation technology to increase efficiency. HEMIC first installed Valen’s predictive modeling engine in 2008, which integrates with the insurer’s policy administration system from Tropics Software. In 2013, the company upgraded to Valen’s InsureRight Platform.

“The driver of both the original
implementation and the 2013 upgrade
was having a cost-effective, consistent
way to portfolio-manage our book of
business,” says Regina Harris, HEMIC’s
vice president of underwriting. “We also
wanted to provide quicker responses to
agents on quotes.”
The Hawaii workers’ compensation
market consists of predominantly small
businesses, so efficiency is important
in reducing underwriting leakage.
HEMIC’s average account premium is
just over $8,000.

Agents can submit new business via HEMIC’s online portal or through integration with a supported agency management system. Applications can also be entered into the Tropics system by HEMIC’s underwriting staff. When application information is entered, an automated workflow processes the information through the Valen platform, with the result generating either a quote based on risk characteristics and scoring or a referral to an underwriter for further review.

For accounts that fall outside
straight-thorough guidelines, the system
provides HEMIC underwriters guidance
about risk classification and pricing
through predictive modeling and the use
of industry data. That type of guidance is
a critical part of today’s commercial un-
derwriting technology, Smallwood says.

“You need a workflow that connects the scoring model to the policy administration system and can automatically trigger underwriting review, as well as a rules engine that can help automate underwriting guidelines,” she says. “Those could be guidelines around hazard scores, class codes, underwriting authority, and other rules that tend to be outside the scope of a policy adminis-

tration system. Automating that process
establishes consistency and targets
leakage.”
HEMIC’s 2013 system upgrade
provided the insurer with access to two
additional, proprietary predictive mod-
els: Valen’s Misclassification Model and
Premium Impact Model. Those models
identify, early in the individual risk as-
sessment, potential exposure misclassifi-
cations and policies where underwriters
should consider premium adjustments.

“By running new business through those models based on risk characteristics, it identifies areas where there may be potential leakage on the front end, rather than on the back end,” Harris says.

“Before implementing those models, it
was incumbent on the underwriter to
catch discrepancies.”
Underwriters may override the
system’s classification or pricing recom-
mendations, but that process is carefully
managed.

“Accounts that go to an underwriter still go through the traditional underwriting process. However, the system records the original recommendation and the underwriter is required to include notes on why that recommendation was not followed. There are also authority levels set on who can modify pricing and how much,” says Harris.

On renewal, policies are also sent through the Valen engine. As with new business, accounts may be automatically processed for renewal or referred to an underwriter for further review.

“We are seeing a considerable number of new and renewal policies being referred for potential misclassification each week” since deploying the InsureRight models, Harris says.

“We have also provided agents the
ability to quote risks online that don’t
need underwriting review and gained
underwriting efficiency by having the
scoring engine perform the initial ‘triage’
on accounts that do need review,” adds
Harris. “It’s helped underwriters save
time in handling accounts and focus
their skills on more complex underwrit-
ing cases. Our underwriting results have
been favorable.”
“We’ve seen companies get anywhere

“The driver of both the original implementation and the 2013 upgrade was having a cost-effective, consistent way to portfolio-manage our book of business.”