In my last post, we talked about the importance of creating a modern approach to rules in insurance. While ensuring that a rules taxonomy, structure, governance and analytics are in place will go a long way to improving the efficiency and quality of underwriting, insurers also need to ask themselves, “Are rules even necessary in the digital age?”

The use of new intelligent solutions to supplement, or outright replace, the rules for key processing steps is perhaps the biggest change that carriers face today. Third-party data, advanced analytics and artificial intelligence are faster, cheaper, and better than rules – and are becoming increasingly so.

Let’s take a look at some of the alternatives to rules that can be crucial in a modern approach to rules.  

Analytics. Many carriers have already started using analytical models in set decisions on pricing to determine win probability, and to assign underwriting based on complexity instead of relying on rules. Analytic models quickly evaluate multivariate information to create scores needed for processing decisions, eliminating the need to create a significant number of rules.

Living processes. Rules are static and limited to their pre-defined guidelines. Artificial intelligence models, however, have the capacity to self-adapt over time. Take, for example, the process of recommending cross-sell options: The traditional approach has been to rely on a complex table based on rules. If these tables aren’t actively maintained, the whole process can break down over time. A living approach offers the opportunity to use an analytical model that checks the data and automatically adapts to make new recommendations as new products are sold. This type of process can also be used for win probability, where static rules often prove ineffective.

Intelligent solutions. Another powerful opportunity to supplant rules is with integrated intelligent solutions. For example, when determining whether a policy can be automatically renewed, a modern approach combines third-party data, social media, natural language processing, and other data to evaluate changes with the insured and determine if automated renewal is desirable.

All of these alternatives have the potential to simplify the rules carriers use, get rid of the ineffective ones, improve throughput, and most importantly, boost underwriting discipline and quality.

If you are developing rules for a new system or updating rules for a replacement solution, feel free to contact me with your questions, comments or feedback.

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