Rewriting the Rules of Underwriting in Life Insurance

From health records and credit scores to social media posts and biometrics, vast volumes of customer data are generated every second. Life insurers that can harness and apply this data for underwriting can differentiate through simplified data collection, personalized products, dynamic pricing, and ongoing customer engagement.

Customers increasingly expect their insurers to provide personalized products, services, and experiences on the same level they receive elsewhere in life and online. In fact, according to the “2020 Customer Compass” survey, 20% of customers indicated a lack of personalization in their policies was their primary motivation for leaving their insurer. As customer demands escalate, it’s becoming mandatory for insurers, and their underwriting teams in particular, to respond to these changes.

The traditional underwriting model has served life insurers well for years. Although there’s always been a drive to reduce policy risks and increase accuracy and speed, most providers are still working with an incomplete data set that provides a snapshot in time, which requires some degree of manual data gathering, assessment, and guesswork.

Digital technology will play an increasing role in reimagining the future of life insurance. Two of the leading drivers of this transformation will be continuous underwriting and accelerated underwriting. These approaches will work together to accelerate risk profiling, reduce costs, create consistency, and enhance the customer experience.

What is Continuous Underwriting?

Continuous underwriting is a new way of thinking about the underwriting process. It enables life insurers to assess risk throughout the life of the policy. By continuously analyzing comprehensive data sets before, during, and even after the policy is underwritten, life insurers can reward insureds who live healthy lifestyles and differentiate their products with new dynamic pricing models.

The volume of data available to life insurers will continue to explode. The internet of things (IoT), wearable technology, social media, credit scores, algorithmic health scores, electronic health records, and genetic profiles will provide a treasure trove of data that insurers can quickly analyze to gain a fuller understanding of individual customers.

Life insurance companies can use the insight mined from this data to power continuous underwriting. Applying advanced analytics to massive data sets will enable life insurers to move beyond low-touch customer experience to high-touch, always-on engagements wherein they can re-price a product based on customer life events and reward healthy behaviors such as sleep, exercise duration, and diet as well as improved health, such as blood pressure, weight, and sugar levels. Notifications and alerts can be automatically sent to policyholders to avoid health hazards, such as poor air or an extended period of inactivity.

These measures will prove to be a win-win for insurers and their customers. Among the most prominent benefits of continuous underwriting will be:

  • Decreased costs based on replacing high-cost data sources, such as blood samples and paramedical exams, with lower-cost sources and process efficiencies
  • Tech-savvy appeal, which will help life insurers market products and experiences that resonate with millennials
  • Minimized risk through a data-rich environment that makes the life insurer aware of risk factors as they appear and a consistent method of evaluating risk across all applicants, reducing human error or empathy
  • Pricing specificity and policy personalization based on a complete customer view, which will lead to more applicants and more customer value
  • Persistent engagements as policies transition from one-time transactions to ongoing engagements with a greater focus on health and wellness

What is Accelerated Underwriting?

One of the biggest frustrations that customers have with life insurance is the belief that the application process takes too long and involves too many steps. Accelerated underwriting solves this by using automation, data, rules, models, and pathing to make underwriting decisions in a much more condensed time frame.

Prior attempts to streamline the underwriting process have fallen short, including simplified issue products, which eliminated the paramedical exam but resulted in expensive products that didn’t meet customer needs. While simplified issue policies served a purpose, they typically are no longer competitively priced against digital-first insurers.

Accelerated underwriting is the new and improved simplified issue, enabling insurers to assess risk faster and more accurately. It requires life insurers to incorporate many types of data into the underwriting process, including those from traditional sources (MIB, Rx databases, and MVR) as well as non-traditional (social, credit, behavioral, economic, medical data from wearables, financial, and identity).

By coupling this data with algorithms, artificial intelligence, predictive analytics, reflexive health questions, and cognitive computing, insurers will have the ability to predict risk with more speed, accuracy, and confidence than ever before. Instead of manually reviewing every applicant, insurers can “path” applicants based on data. Low-risk, preferred applicants get instantly approved for special rate classes and pricing structures — without the dreaded paramedical exam. Predictive models automatically flag higher-risk applicants for additional underwriting and manual review.

The highest-performing underwriting groups will be those that successfully blend advanced analytics with human judgment. Potential benefits for accelerated underwriting include:

  • Increased sales as more applicants recognize the advantages of a less invasive and less time-intensive application process as well as better prices
  • Faster decisions powered by automated decision trees, which will improve the customer and agent experience
  • More consistency as cognitive computing enables data-driven decisions and reduces potential manual points of failure
  • Improved loss ratios enabled by a data-rich environment that allows for more granular and accurate risk classifications and pricing specificity

What Are the Technology Requirements for Underwriting Innovation?

At their heart, continuous underwriting and automated underwriting are data-driven activities. They both will require partnerships with third-party data vendors and insurtechs to mine available customer data. However, without the right technology to seamlessly take in data, analyze it, and integrate it into products, life insurers seeking to innovate their underwriting processes will be set up to fail.

Unfortunately, many insurers are saddled with legacy core systems that hinder or prevent these data streams from being incorporated into products and algorithmic decisions. For life insurance underwriters to truly capitalize on the insight they ascertain from raw data, they require a cloud-native, API-enabled policy administration system (PAS) that enables the development of the perfect underwriting ecosystem. A modern, digital PAS with embedded underwriting and agent tools will let insurers employ external data into a fully digital workflow, ensuring the most consistent and personalized underwriting approach.

How EIS Can Help Life Insurers

EIS believes streamlined underwriting innovation is a first rung in a ladder that will lead to broader life insurance transformation. We have built the first coretech insurance platform that lets life insurers speed up all facets of their business. As a cloud-native, API-first solution, it helps insurers easily consume data in any form, from any source. By supporting the continuous analysis of data and applying advanced analytics, EIS powers rapid underwriting and the faster creation of personalized insurance products.

To learn more about how our platform can power your underwriting transformation, contact us today.

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