Transformation of Life Insurance Underwriting

Life Insurance carriers are looking for a competitive advantage. It’s why they’re applying technology and digital platforms to capitalize on underwriting trends: automated, digital, data driven and fluidless. They’re rethinking the underwriting function with trends in mind to drive new business and higher levels of service and efficiency. This article explores several ways of using the technologies available to reimagine the underwriting experience and produce results.

Before Deep diving into the Transformation, let’s understand

what Life Insurance Underwriting Process is:

Life insurance underwriting is the process by which insurance companies evaluate the risk associated with insuring an individual. This typically includes a review of the individual's medical history, occupation, lifestyle, and other factors that may impact their risk of dying prematurely. The underwriting process also includes a review of the individual's financial situation, including their income, assets, and debts. Based on this information, the insurance company will decide whether to offer coverage, and if so, at what premium rate. The process may also include a medical examination. The process can take 45 to 60 days, according to the Society of Actuaries

The trend of Life Insurance Business is shifting from being sold to being bought. What does that mean is, in past if we have to shop for a Life Insurance product you probably have to seek advisors to shop for a right product but over last 10 years, technology has disrupted the way insurance business is being operating. Now it’s easy and fast to get a quick shop online and get a quote for life insurance. The initial quote is an estimate of what you’ll have to pay based on several questions you answer about yourself. To determine the final quote, insurance companies go thru the underwriting process to gather information about you and assess how much they should charge you.

The underwriting process can vary?depending on what type of life insurance you’re shopping for.

• Full underwriting:?The traditional underwriting process requires you to fill out a lengthy questionnaire and take a life insurance medical exam. The insurance company will gather information from third-party sources.
• Accelerated underwriting:?Also called no-exam underwriting, this process is similar to the full underwriting process but doesn’t require you to take a medical exam. Companies such as Bestow, Fabric, Haven Life and Ladder use technology to collect information about you and provide?fast life insurance?within a few minutes.
• Simplified issue:?With this underwriting process, you only have to answer a handful of questions. If you answer yes to any you likely won’t qualify for coverage. There is no medical exam. Because simplified issue policies require less information from applicants, they tend to be more expensive.
• Guaranteed issue life insurance:?You can’t be turned down for a?guaranteed issue life insurance?policy. There are no questions and no medical exam. It’s convenient, but it’s also usually the most expensive way to buy life insurance. It’s meant for people whose health would make it impossible to buy other types of life insurance.

Life Insurance Information sources at glance:

For all the different types of Life Insurance Underwriting, insurance company will often gather specific list of information that will vary among insurers , coverage you want and the policy types. It can also depend on your age and health.

Fully underwritten policies use the most information, which is collected from the sources like those listed below. Accelerated underwriting uses many of these same sources – except the medical exam. And the simplified issue underwriting process might use limited third-party?information.

You’ll be asked?about your age, personal medical history and mental health, family medical history and whether you’re a tobacco user. There also will be questions about your driving record and any upcoming travel plans to certain risky countries.

Insurance companies will ask for personal information such as your Social Security number and birth date to confirm your identity. They may also want to know what your salary is because they might limit how much insurance you can get based on your annual earnings.

It’s important to answer questions honestly. Remember that Insurance companies will verify much of the information you give them through other sources. Incorrect answers could also potentially void your policy later on.

How an Underwriter use the data that is gather:

Underwriter will use the information they gather to determine your underwriting class,?which is essentially your risk group. Your life insurance quote will generally be higher if you use tobacco, are overweight, have high blood pressure or chronic health conditions such as diabetes, or have a dangerous hobby or black marks on your driving record.

It’s smart to work with an experienced life insurance agent who can identify the insurers likely to give you the best quote based on your personal information.

In general, the more information an insurer gathers about you, the more accurately it can price the coverage you buy.

Underwriting transformation:

Data is a critical component of the underwriting process and can provide significant competitive advantages when leveraged effectively. The combination of data, automation technologies, and interconnected ecosystems can help insurers to differentiate their offerings, providing a compelling competitive advantage over their competitors.

Converting Data Intake into Insights:

Life Insurance carriers capture abundance of data and is presented to Underwriters in unusable format. The data is buried in submission documents and various systems of record or available through third-party systems.

?A digital fulfilment platform can the solve the data problem by automatically ingesting submissions, extracting and cleansing data, and then by supplementing it with third-party data. The result is usable data that enables underwriters to improve underwriting capacity and decisioning. And once formatted, the data becomes reusable and easily accessible if stored in a centralized repository.

An intelligent study on ingested data, opens a new possibilities for underwriters to support the product development and distribution. Instead of underwriters source and comb through data manually, an intelligent process can do it for them, which expands their capacity to support sales and new business efforts by quickly testing new products and markets

Ingested data can be reused to provide a better experience for its Insured and significantly reduce the time to issue a policy. Repeat customers now avoid the paramedical exam because the insurer reuses evidence gathered from the Insured previous application, provided the evidence is used within a timeframe specified by the insurer. During the application process, the system automatically locates any previous applications, and if the date of the evidence falls within the expiry date, applies the evidence to the new application.

Information Presentation:

Data is only valuable if it can be used to gain insights that support effective decision-making. In the case of underwriting, this means that data needs to be presented in a way that allows underwriters to quickly and easily understand the information that is relevant to their decision-making process.

Simply having access to data is not enough. To truly unlock its potential, data needs to be organized, analyzed, and presented in a way that supports effective decision-making using the following factors:

• 360-degree views of data that are readily available and accessible.
• Comparative analytics to compare the outcome of automated underwriting with a past case that was manually underwritten. This allows the insurer to evaluate the effectiveness of their automated underwriting process and identify any potential areas for improvement. By comparing existing data and decisions with alternative data, insurers can gain a deeper understanding of their operations and identify areas where they can make changes to improve quality control and effective solutions. This can help to reduce risk, improve the accuracy of underwriting decisions, and increase overall efficiency.
• Automated alerts can help to improve the efficiency of the underwriting process by streamlining reviews and escalations.
• Risk scores augmented by using digital health and wellness platforms from providers such as dacadoo to help insurers improve risk assessments. These platforms provide valuable insights into insured health and wellness, including measurable risk quantification, which can help underwriters to make more informed decisions., but also serve as an engagement tool to encourage healthier lifestyle habits among policyholders.

Performance Automation:

The use of intelligent services, such as robotic process automation (RPA), can help to improve the efficiency and effectiveness of the underwriting process. By automating routine and repetitive tasks, such as data entry, intelligent services can free up underwriters' time, allowing them to focus on more complex and strategic tasks.

In addition, these services can also help to improve the quality of underwriting decisions by leveraging data and data analytics to provide underwriters with predictive models and key insurance metrics. These metrics can help underwriters to make informed decisions and identify areas where additional analysis or review is needed, reducing the risk of errors and oversights.

Underwriting can be a complex and time-consuming process, leading to increased workloads for underwriters. However, by taking a holistic approach to the underwriting value chain and applying intelligent automation, underwriters can alleviate some of these workloads, while increasing their efficiency and effectiveness.

Intelligent automation can be applied throughout the underwriting value chain, from data collection and verification, to risk assessment and decision-making. This can help to streamline the underwriting process, reducing the time and effort required to complete each task.