The importance of exception management in digitizing the risk intake

By Richard Hartley, CEO, Cytora

Mid-market commercial insurers have to design for heterogeneity. Risks arrive in many shapes and sizes containing different combinations of data fields. Some arrive complete with the expected information, some don’t. 

This is at the root of why insurers find it hard to become digital-first as their risk intake is mostly both analogue (meaning it can’t be read and understood by a machine), the format of risk submissions is different and content is inconsistent. At the same time data accuracy is a prerequisite given the regulated nature of the insurance industry.

Other industries – for example navigation (e.g. Google Maps) and increasingly retail banking (e.g. Revolut) – have a digital interface to their customers and get consistent, standardised and machine readable data from every customer. 

It means that in commercial insurance the digital processing of risk submissions needs to be more flexible, nuanced and ultimately sophisticated to deal with the wide spectrum of input formats and intelligently handle exceptions that inevitably arise.

Only with this type of approach will insurers achieve an end-to-end solution that encompasses every type of risk submission they receive and maximises the level of automation over time.

Integrated exception management

As we outlined in a recent Instech London report, exception management that is fully integrated into the digitization workflow holds the key for insurers to achieve a measurable uplift to productivity and underwriting margins. 

Risk submissions where all of the target data fields can be automatically extracted can be digitised, augmented with external data, evaluated and routed to the right destinations, creating capacity for underwriting teams to write more business within their risk appetite.

Risk submissions where specific data fields can’t be automatically extracted at the defined confidence level or where data field discrepancies exist with verifying external data sources are moved to an accelerated exception management workflow where an administrator reviews the submission, inputs the remaining data fields allowing the risk to flow back into the automated processing journey. 

This enables insurers to solve for their entire new business intake while allowing them to benefit from the rising tide of automation. 

Every time a risk moves through the exception management workflow, the inputs from the exception management write back into the platform which learns about the structure of the document and its semantic context, driving continuous uplift in the percentage of risk submissions that can be automatically processed.

Over time the risk processing platform gets more and more tuned to the shape of the intake enabling the insurer to achieve a compounding advantage.

Source of competitive advantage

This continuous feedback loop is a powerful source of competitive advantage for insurers who over time maximise scalability (the percentage of risk submissions they can automatically process without expanding resources or team size), superiority in risk differentiation (by increasing comprehensiveness of data capture) and achieve market leading responsiveness to brokers.   

Insurers who achieve digital risk processing with integrated exception management will be the first movers to unlock true scalability where premium grows exponentially to cost at a given profitability level.