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Simplifying Complexity: Addressing a Growing Volume of Underwriting Rules

Earnix Team

January 13, 2025

  • Underwriting
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Survey results from the Earnix 2024 Industry Trends report found that that nearly 75% of insurers had hundreds of rules in their underwriting systems, while 18% of respondents reported that they had thousands. 

How does this happen? The total number of rules tends to grow as internal teams add new guidelines to address emerging risks and changes to regulatory compliance, review business results more frequently, or meet unique market needs. Yet if these additions are not revisited or improved, insurers face the real risk of having too many redundancies and even conflicting conditions.  

Over time, so many layers of rules can make it extremely difficult to understand the underlying logic or the full decision-making process. This lack of clarity can lead to time delays, internal inefficiencies, and the potential for errors that further undermine the underwriting system’s overall effectiveness.  

Unfortunately, such a high number of automated rules inevitably leads to overly complex underwriting systems. From the same research, the vast majority of insurers said that their automated underwriting environment was either “very complex” or “extremely complex.”  

As underwriting complexity increases, insurers tend to express a stronger belief that the total system of automated rules should be simplified. For example, in the category of “moderately complex rules environments,” only 30% of insurance executives felt the system needed adjustment. Yet this number increases 50% in the case of “extremely complex automated underwriting rules.” None of the executives felt that their rules environment should become more complex.    

The takeaway is clear: As the complexity of automated underwriting rules grows, so does the urgency for insurers to streamline and improve their rules environments.  

Challenges Related to Overly Complex Underwriting Systems 

One of the biggest challenges related to highly complex systems is the time it takes to deploy underwriting rules changes.  

Our research found that 37% of insurers can now implement underwriting rules changes in 5-6 months. While this is a positive development – roughly the same number of companies required 7-12 months in our 2022 research – it is still light years away from some insurers who can now move rule changes into production in just weeks, days, or even hours. 

Such a high number of automated underwriting rules can also make it hard for insurers to effectively monitor and evaluate their underwriting practices and overall results. Today, 49% of insurers reported that their monitoring only happens with the next rate review, while 13% said that they still perform ad hoc monitoring, usually when the change may have a significant impact on profitability.  

Yet as the number and complexity of rules increases, insurers may not be able to understand which rules are driving specific outcomes, making it difficult to identify inefficiencies or other opportunities for improvement.  

Insurers are also looking to integrate new data sources to unify their datasets and strengthen their overall modeling efforts, yet again, overly complex rules environments can pose real challenges to their efforts. As data from new sources become more valuable for accurate risk assessment, insurers must make sure their systems can accommodate this new information and use it in their modeling processes. The reliance on too many legacy systems contributes to silos that prevent seamless data integration, and outdated or redundant rules may not be able to incorporate or analyze new data types.   

Simplify Underwriting with Modern Insurance Technology 

What is the best alternative? Today, modern insurance technology, such as the Earnix Underwrite-It solution, empowers insurers to overcome the challenges related to highly complex automated rules environments. These solutions provide enhanced tools for automating and enhancing underwriting processes, enabling insurers to identify and eliminate redundant conflicting rules.  

For example, Earnix Underwrite-It enables not only the traditional scorecard rules-based approach to creating underwriting rules but also offers advanced machine learning capabilities. In addition, it allows insurers to manage both pricing and underwriting rules in one place. As a result, users can build smarter models more efficiently to deliver better underwriting outcomes. 

Our research also found that 36% of executives identified “integrating new data sources” as the most significant challenge in their current underwriting rules processes – the top answer cited. The good news? Modern insurance technology can help in this area, too.  

Innovative technology can offer sophisticated data integration capabilities to disparate data sources, allowing for more accurate risk modeling and real-time insights. By simplifying internal underwriting operations, insurers can respond quickly to market changes, improve customer experiences, and achieve better business outcomes.  

Navigating Complexity: A Roadmap for Better Underwriting Results 

Automated underwriting rules are like a sprawling network of roads – each new addition attempts to fix current challenges similar to building new roads to eliminate traffic jams. In the case of roads, while the changes may be effective initially, the entire environment becomes increasingly complex as more roads are added, which can lead to new bottlenecks, slower traffic, and even the need for duplicate routes.  

In the same way, the unchecked growth of underwriting rules can result in too many redundancies, errors, and internal inefficiencies. To prevent this complexity, insurers must adopt a strategic, forward-thinking plan – consisting of regular audits and even modern insurance underwriting automation technology – to improve the simplicity and efficiency needed to support business growth.   

Explore More Industry Insights 

Interested in additional research findings related to underwriting – and so many other trends and topics? Download the Earnix 2024 Industry Trends report today.

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Earnix Team