Underwriting Administration

Client: International Life Insurance Company

Project Statement

Use modeling and simulation to improve the Underwriting Process and improve the application cycle-time. The current process was taking several weeks to approve a new application. During this time premiums are not collected, thus each day process represents a day’s premiums not collected.

CACI consultants followed their standard approach to modeling and simulation projects. The first step was to understand the current business environment by collecting system metrics (such as work schedules, hourly rates, number of applications per day, etc.) and talk to users of the current system. An “As-Is” model was then built showing life and disability applications being processed. This model underwent verification and validation. The current cycle-time per application was three months with an issue rate of 77%. These numbers were used to check the behavior of the “As-Is” model.

Once the “As-Is” model was built, questions could be answered such as:

  • What is the application cycle-time?
  • Where do delays occur in the system?
  • What are the labor costs?
  • What is the cost per application?
Once the “As-Is” model was built and validated, the consultants began looking at various ways to improve the current business process. These improvements were incorporated into a new “To-Be” model that produced encouraging results.

CACI Services Involvement

CACI consultants utilizing SIMPROCESS built the “As-Is” and “To-Be” models of this life insurance company’s business practices.

Deliverables

“As-Is” and “To-Be” simulation models built with SIMPROCESS. Written documentation outlining the results of the project was also provided.

Results

The “As-Is” model produced results that were similar to the predicted results. The average cycle time came out to 86 days (as compared to the predicted 90 days), and the application issue rate figured out to 76% (as compared to the predicted 77%). Therefore, the “As-Is” model was accepted as the baseline for the project.

The CACI consultants began to examine alternatives to the current business practices. Ideas were tossed around such as increasing the staffing levels, accepting applications and credit card numbers via email, and generating e-mail applications. All of the improvements were constructed with the following goals:

  • Reduce application cycle time
  • Increase quality
  • Improve cost effectiveness
The following changes were made in the “To-Be” simulation model:
  • Applications were accepted via email
  • The underwriting rules and criteria for agents were modified
  • An electronic underwriting worksheet was developed to allow for real-time status updates
  • Increased staffing
After the “To-Be” model was run, there was a reduction in almost ten days in the application processing time (76 days down from 86 days). This reduction allowed for almost a 60% increase in the number of applications this company could process yearly. The “To-Be” scenario did raise operating costs close to 16% with the addition of the extra staffers. However, given the dramatic increase in the number of applications processed, this increase in cost was acceptable.