Underwriting: Navigating the metrics maze

By Laura McKiernan Boylan

In life insurance technology, the success of a product launch hinges on more than just the accurate implementation of requirements. Careful evaluation of customer interaction and funnel performance can tell you whether your technical requirements are on track to meet your business objectives. It can be easy to get caught up between lenses of accurate implementation and effective program design, leading to confusion regarding untangling performance data. Ultimately, the only thing that matters in a product launch is whether it drives the business measures you care most about.

Accuracy in underwriting

The foundation of any underwriting effort is accuracy. It poses a crucial question: Is the program functioning as intended? In the context of an underwriting program, this boils down to whether your data science models and risk evaluation methodology were implemented as expected and whether impairments are segmented into the correct risk class based on expected mortality.

Precision is essential here. Underwriters strive to evaluate risk with meticulous attention to detail, relying on data-driven insights to make well-informed decisions. Accuracy depends on the reliability of information, the strength of analytical tools and the expertise of those using them. A departure from accuracy can have significant repercussions, putting the very principles of underwriting at risk.

Effectiveness

Effectiveness shifts the focus to broader horizons beyond technical precision to strategic alignment. Is the program meeting the business goals? The true effectiveness of an underwriting program is hard to measure because it depends on the evolution of decades of mortality experience compared with pricing assumptions. It includes applicant disclosure, alignment of impairment severity to actual mortality, and applicant and advisor behavior throughout the underwriting funnel.

This question goes beyond operational efficiency to encompass the organization's overarching objectives. It requires a holistic perspective, considering short-term gains and long-term sustainability. A genuinely effective underwriting program seamlessly integrates into the business, driving profitability and fostering growth.

Compliance

Regarding life insurance and other financial services products, regulatory compliance introduces another layer of complexity into the equation relative to most consumer experiences. Amidt the intricate interplay of risk assessment and business strategy, one must not lose sight of legal obligations. Are we following the law? This fundamental query underscores the importance of regulatory adherence in the underwriting landscape.

Compliance extends beyond mere checkboxes, embodying ethical responsibility and societal trust. Failure to uphold regulatory standards invites legal repercussions and tarnishes the organization's reputation and integrity.

The nuance between these metrics can be muddled between different stakeholders and perspectives. Rules might perform as designed on paper, but underlying applicant disclosure and mortality experience may translate to missing underlying profitability targets. Searching for accuracy, effectiveness, and compliance can become a complex journey of uncertainties and ambiguities.

However, within this complexity, there is an opportunity for clarity. It can be difficult to communicate effectively when one party focuses on accuracy, and the other focuses on effectiveness.

The core of underwriting is not just about individual metrics but about how they work together. Being accurate without being effective is like being precise without a purpose. Similarly, compliance that isn't accurate and effective doesn't mean much. It's the seamless integration of these elements that truly defines underwriting success.

In navigating this metrics maze, it's crucial to maintain a balanced perspective. The goal is not only about achieving measurable metrics but also about reducing risk, increasing profitability and upholding ethical standards. Let's not overlook the qualitative aspect of excellent underwriting in our pursuit of answers.

Every organization and underwriting program is unique, with its own set of goals and challenges. But one thing remains constant: the need for continuous measurement and improvement. By engaging in thoughtful reflection, making iterative refinements, and committing to the pursuit of excellence, we can uncover the true measure of underwriting effectiveness. Let's not view complexity as a hindrance but as an opportunity for growth and innovation, inspiring us to reach new heights in our underwriting practices.

Laura McKiernan Boylan is Bestow’s vice president of underwriting solutions. Contact her at [email protected].