Manual vs. Automated Insurance Underwriting: The Ultimate Comparison Guide

Oct 08, 2021
Insurance | 5 min READ
Automated Insurance Underwriting
What is it?
Automated insurance underwriting leverages tech tools such as artificial intelligence (AI), robotic process automation (RPA), natural language processing (NLP), optical character recognition (OCR).It accesses real-time data from 3rd parties using APIs. Automated insurance underwriting by deploying tech tools such as AI and machine learning in insurance helps companies evaluate risk and decide how much coverage the client should receive and how much they should pay for it.
Rishi Verma
Rishi Verma

Practice Director



Automated insurance underwriting can verify the risk associated with a client by working in sync with the insurance company's underwriting guidelines. Such immense possibilities ascertain greater profits for the insurance companies and enhanced customer satisfaction through more personalized policies.
Why is it Gathering Traction?
More than 50% of the consumers stated that insurance companies are trailing other industries to leverage technology to their benefit. While insurance companies were sluggish in coming to terms with the fast-paced technological advancements earlier, the onset of the COVID-19 pandemic has served as the wake-up call to make insurance purchasing simpler and more digitally enabled.
Automated Insurance Underwriting possesses the excellent capability to handle less complex cases, freeing up underwriters to address more complex issues on hand. With easy access to a digital assistant, intelligent automation aids insurance people to interact with the user in real-time and understand, assess, cater to, and manage his requirements through a simple interface. Moreover, to meet the changing expectations, the insurance industry needs to improve responsiveness and make better use of technological advancements.
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Why Manual Underwriting is Losing Steam?
Manual Underwriting is marred with challenges such as poor customer experience and high customer attrition, low underwriting efficiency and profitability; poor risk management & pricing; and lower Underwriting and risk ratios. Moreover, in this digital renaissance age where consumers seek 24-hour access and quick delivery, clear & relevant information about a product's features, etc., insurance companies need to quickly up their game with the help of automated insurance underwriting.
Head-to-Head Comparison: Manual vs. Automated Insurance Underwriting
Customer Experience
Manual Underwriting
Automated Underwriting
Manual Underwriting can bring in the comfort of personal touch to attract more clients. However, it's an awful lengthy process. The accuracy and speed of Underwriting aren't as reliable as they would be in automated Underwriting. 
Long-drawn manual form-fills, complex fineprint, errors and omissions in Underwriting, long turnaround times, higher premiums, lack of product personalization, and predictive services are all the factors that turn customers away from manual Underwriting. Drawing up and sending quotes for commercial insurance to clients can easily take up 2-3 days, even in the most efficient manual underwriting-based operations.
AI-based underwriting systems empower insurers to deliver a better customer experience at the sales stage and build loyalty from the first contact with the customers. It automates low-complexity tasks and frees up underwriters for more complex interactions with the customer. Once that happens, insurers can focus their attention on a long-term retention roadmap based on personalized account servicing and lucrative pricing models. 
Looking at the potential it holds, leading insurers have already started working towards upskilling their underwriters to take on more complex roles and to adapt to highly satisfying and work enabling digital platforms.
Pricing and Risk Management
Manual Underwriting
Automated Underwriting
Every application has a new set of risk variables that are becoming more and more complicated to assess and account for with precision.
Manual Underwriting has inefficient pricing, quality issues, and probable procedural errors. The top and bottom quintile of performers logged a 23-28% difference in the loss ratios. Manual Underwriting is error-prone in creating risk profiles or assessing the amount of risk required for each individual.
Using Automated Underwriting, Artificial Intelligence is leveraged to assess an application against billions of data points. Underwriters gain visibility into the most relevant risk factors associated with client profiles through the use of big data and associated algorithms.
AI-driven underwriting system assists underwriters in quantifying unstructured and quantitative data points. AI-driven automation in Underwriting brings complete risk visibility into a case. It thus helps in suggesting the best possible quotes and coverage to the underwriters.
Underwriting Efficiency
Manual Underwriting
The manual underwriting process takes over weeks to receive a quote post-application for the most high-value accounts, making it one of the most time and resource-intensive processes in the insurance customer life cycle. In addition, the manual nature of the work affects productivity adversely.
Automated Underwriting
AI-assisted Underwriting is the clear winner when it comes to underwriting efficiency. Leveraging RPA and building intelligence into the system for light and repetitive tasks helps underwriters focus on complex tasks and final decisioning.
For instance, AI-driven underwriting systems can help underwriters issue a quote for high-value accounts on the date of application in a matter of seconds without investing manual efforts.
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Operational Costs
Manual Underwriting
Automated Underwriting
The cost of Underwriting can range as high as $50-130/hr, multiplying on a headcount basis in some lines of business, and the underwriting process can take anywhere from days to weeks.
Moreover, scaling up with manual Underwriting comes at high fixed costs in addition to increased operational overheads. The workforce is costly, and insurers quickly turn to digitalization to increase productivity and save operating costs.
Insurers and insurance companies can significantly save operational costs by furthering the growth of automated Underwriting. It creates a smooth workflow revolving around Machine Learning models that can self-train and adapt to the patterns and nuances of the system without any additional costs to scale up.
Business Growth
Manual Underwriting
Automated Underwriting
Manually generated insurance quotes are slow in comparison to algorithmically generated pricing decisions. When customers choose between the two, they will ultimately select the ones who take the least processing time and can assist 24*7.
The labor-intensive and cumbersome process leads to customer attrition, which eventually dents the insurer's reputation in the market.
AI-based Underwriting enhances profitability by assisting underwriters in delivering improved loss ratios, a higher churn rate, quotes that convert better, and eventually optimizing the underwriting function's overall resource utilization.
With the underwriter's evolving role as a business builder and a digital manager in an AI-first insurance enterprise, companies can now realize improved expense ratios and employee experience.
According to industry experts estimates, up to one trillion connected devices by 2025 will automatically result in an avalanche of new data, allowing carriers to understand their clients deeply. Such insights will give rise to new product categories, more personalized pricing, and increasingly real-time service delivery to insurance clients, all thanks to the AI-assisted underwriting landscape.
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