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How video and singles matching services can inform the risk selection process

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Michael Parcelli

VP, Underwriting SME, Insurance

April 25, 2018 - The underwriting risk selection process represents the implementation of a strategy where insurance carriers believe that they can write profitable business in the current rate environment. In the end, it's about match-making between a carrier and a risk that fits the carrier's target profile, better known as the "inside-out" approach. Policyholders have the same inside-out view when looking for a carrier that meets their policy and customer service needs, at a price they're willing to pay. This process is the same as the premise of the algorithms used by entertainment subscription services to match movies and TV shows to viewers, and dating services to match singles to potential companions.

Obviously the situations are different, but the concept remains the same. Machine learning looks for patterns of behaviors and leverages analytics and artificial intelligence to recommend best matches for the user. Although every match is not 100%, this approach increases the potential for a successful match, while lowering the time it takes to find that match. This process has been implemented in the risk selection process for insurance carriers and has worked successfully not only to improve hit ratios, but also to profitably grow written premiums in the target segment.

The selection process is only half of the equation, as the specific account within that class will require the assessment process to grade the class fit. The value in extending the matching technology into the underwriting process is that it increases the efficiency of the process. Underwriters focus on those accounts that match underwriting strategy. With a focus on strategy delivered by the technology, the underwriter can allocate more time to the critical issues of profitability and complexity of the class fit.