Breaking Through the Noise for Optimum Underwriting
Noise! Kids screaming, dogs barking, cars honking, need I go on? Sometimes it seems you just can’t get away from it. And, I hate to tell you, but noise is everywhere. Would you believe me that there is even noise in our professional settings, a different type of noise – especially in life insurance underwriting?
I know what you’re thinking…Your underwriting process seems peaceful enough, no shouting or screaming coming from your underwriters. Not according to Daniel Kahneman and his new book Noise, A Flaw in Human Judgement, recently recommended to me by my team. The Nobel Prize winner and his colleagues did a ‘noise audit’ to determine how much disagreement there is among professionals considering the same cases within an organization? The results were quite surprising.
For the same case scenario, they asked how different would the estimate of two similar claims adjusters or underwriters be? What’s your guess on how different the conclusions were? Based on your established rules, your underwriters experience, you would hope for little to no difference in the decision.
Read the Xcelent Award for Breadth of Functionality 2020 in New Business and Underwriting Systems: North America
You would be wrong! Ok, maybe you’re a realist and assume there will always be objectivity, as most people would, and say a 10% difference. Sorry, wrong again! Kahneman’s study found it to be a whopping 55% difference! And what do you think they attribute this difference to? Noise! Outside influences, personal thoughts, time of day, not enough food, too much food, it is all noise that inadvertently affects judgement, even for the highest trained individuals such as judges, doctors, and yes, even life insurance underwriters.
How can you get rid of the noise in your underwriting? The solution is a four-letter word…. DATA! No, really, it’s a four-letter word and a nine-letter word… Data and Analytics. How are you using data to optimize your life underwriting processes? Data-based decisions are of greater value than ever, particularly in life insurance policy underwriting.
Using data to assist in decision making is nothing new, but with more and more sources of data at our fingertips, how to use it and use it effectively is the first step. Using data effectively means data can help make consistent judgements and decisions that result in better outcomes. As we gain more data, and more actionable insights into our processes, we can adjust our automated rules, thresholds and limits, and can even begin to predict outcomes more effectively. You can cut down the noise.
Using data accelerates the underwriting process, streamlines time to decisions and improves risk. Shhh, it’s already getting quieter in here. Are you ready to quiet your noise too?