Why has Spruce's automated underwriting system seen a 15% decrease in approval rates over the past month?

Introduction

Spruce's automated underwriting system has experienced a 15% decrease in approval rates over the past month, signaling a critical issue that demands immediate attention. This analysis will systematically identify, validate, and address the root cause while considering both short-term fixes and long-term strategic implications.

Step 1

Clarifying Questions (3 minutes)

• Looking at the timing, I'm thinking there might be a recent system change. Has there been any update to the underwriting algorithm or data sources in the last 1-2 months?

Why it matters: System changes often have unintended consequences on approval rates. Expected answer: Yes, there was a minor update to credit score weighting. Impact on approach: If confirmed, we'd focus on analyzing the impact of this specific change.

• Considering potential data issues, have we confirmed that the 15% decrease is consistent across all user segments and loan types?

Why it matters: Inconsistent changes could point to specific user groups or loan products being affected. Expected answer: The decrease is more pronounced in certain segments. Impact on approach: We'd prioritize investigating those segments and their unique characteristics.

• Given the significance of the drop, I'm curious about any changes in the competitive landscape. Have we seen any major shifts in competitor offerings or marketing strategies recently?

Why it matters: External market forces could be driving changes in our applicant pool. Expected answer: No significant changes noted in competitor behavior. Impact on approach: We'd focus more on internal factors if external influences seem stable.

• Thinking about potential technical issues, have there been any reported errors or anomalies in the data feeds that support the underwriting system?

Why it matters: Data integrity is crucial for accurate underwriting decisions. Expected answer: Some intermittent issues with a third-party data provider were reported. Impact on approach: We'd investigate the impact of these data feed issues on approval rates.