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442 Alternative decision-support systems
One development of the system is to automate the majority of the
underwriting process. Details from a life proposal form can be entered
into the system at a branch office by a clerk with no underwriting
experience. Evidence is automatically sent for where required, with
details of complete medical reports, questionnaires, etc. also entered
into the system by a clerk.
The automated processing, which gives ‘instant’ decisions on 85% of
applications (as opposed to a previous baseline of 65% instant decisions
by clerical staff who consulted a simplified underwriting ‘screening’
manual) leads to increased speed and consistency of application processing
for substantially more customers. In addition, since insurance
brokers typically send off several proposals for an individual customer,
the first positive decision back to a customer has a business advantage.
Another calculation revealed that, since the senior underwriter was
much less comprehensive in this request for medical evidence (at a cost
of roughly $75) than the deliberately conservative ‘screening’ manual, a
saving of many hundreds of thousands of dollars could be achieved by
letting the senior underwriter in the expert system decide when further
medical evidence was required.
Some companies are now processing 90% of their new life applications
through expert systems. Extant systems are now able to perform electronic
data interchange (EDI) with third-party information providers
such as screening laboratories. The biggest benefit is seen to be time
saving in the turnaround of life proposals.
However, another argument is that expert systems that enhance speed
of turnaround time should not be deployed without careful consideration
– since customer relationships need to be built for long-term
retention. Such relationships have, at least in the past, been built on
face-to-face meetings of field agents and potential customers – where
policy alternatives are discussed and confidence in subsequent recommendations
is established. 27
The expert systems built by Nippon Life 28 and by the Swiss Reinsurance
Co., 29 among others, have attempted to produce fully automated
systems. In these cases, the system builders have attempted to automate
the entire life underwriting procedure, by encoding their extensive
underwriting manuals into knowledge bases.
The extent to which this has proved feasible is still an open question,
for the law of diminishing returns applies at a certain stage, where it
becomes less and less economic to encode the rules required to deal
with the last few percent of all cases (which was left, in one system, 30
for expert underwriters to deal with). However, none of the systems