Why Rules-Based Automated Underwriting is the Right Choice

Underwriters have one of the most important roles in the lending process. They must ensure that their quotes are both attractive to prospects and lucrative for the company.

An underwriter collects a candidate’s information to set the amount, interest rate, and time period. This means that they need to go over data, statistics, laws, and regulations before making an offer.

Needless to say, this is a demanding and time-consuming job.

The solution? Rules-based automated underwriting.

Automated underwriting solutions give lenders the ability to make fast and accurate decisions, which are necessary for improving customer experience.

Automated underwriting platforms are able to process an application in mere minutes, shaving off days that would normally take a human underwriter.

Issues with Manual Underwriting

As the name suggests, manual underwriting requires a human underwriter to complete the process. Apart from the fact that manual underwriting is more expensive than automation, there are several other problems with this approach.

In order to give an accurate quote, the underwriter has to sift through huge volumes of documents. As a result, it could take days before a decision is reached. This makes it very difficult for lenders to respond to real-time demand when the underwriting process is so lengthy.

Also, since manual underwriting is performed by a human it means that the process isn’t error-proof and that the risk of inconsistent decisions is very real.

These are only some of the most common problems with manual underwriting that can have a disastrous effect on an organization.

Manual Underwriting Does Have Its Role

Every lender needs a human underwriter who’s going to assess difficult or unique applications. For instance, you would need the expertise of a human underwriter in cases where the client information is incomplete or seemingly contradictory.

However, while manual underwriting has its role to play, lenders are using automated underwriting platforms to quickly advance qualified applicants.

How Does Automated Underwriting with a Business Rules Engine Work

An automated underwriting system that uses a business rules engine to process loan applications first collects basic data such as addresses, social security numbers, employment status, and earnings details. Then the automation software uses this information to fetch more actionable data, such as the applicant’s credit score.

The automated system only needs a couple of seconds to do all the heavy lifting. Once the algorithm comes up with a risk assessment, the underwriter quickly reviews the result before issuing a formal offer.

Operational Efficiency

Automated underwriting streamlines the first stage of the underwriting process — it has the ability to instantly generate decisions that can take days to complete manually. In many simple cases, there’s no need for any human supervision.

Another advantage of automating the underwriting process is that there’s little human input. A business rules engine follows clear instructions that define each stage in the process. This means that the risk of mistakes is significantly reduced.

Conclusion

As long as the system has correct data, its decision will be accurate. Businesses don’t have to worry about things like transposition mistakes that can produce false assessments.
Automated underwriting is one of the best ways for lenders to become more competitive.
Automation can be used to underwrite a wide range of loans. Automated underwriting solutions are widespread and are available to both smaller startups and large established banks.