The Evolution of Underwriting
Today’s world is completely on-demand. We can have any type of food delivered to our door in 30 minutes or paper towels on your front steps within two hours. And this expectation for getting things on demand, fast and efficiently, is no different when it comes to something as complex as life insurance underwriting.
As the industry changes to not only meet the demands of consumers who are looking to manage risk, but to also keep up with technology and regulatory changes, underwriting has evolved. From accelerated underwriting at one end of the spectrum, to complex, large cases at the other end, life insurance underwriting looks different than it used to. Here are some of the ways the practice is changing in the industry.
Need for speed
While the life insurance industry was on a trajectory to speed up the application process with increased digital capabilities, the pandemic put things on the fast track with customers suddenly not wanting to meet face-to-face or have a physical.
And carriers have stepped up to the challenge of not only conducting underwriting faster, but doing more business faster. And consumer demand is in line with these changes. In fact, according to a recent Allianz Life study, 41 percent of Americans said the pandemic increased their interest in getting a life insurance policy or increasing their life insurance.
In response to these demands, carriers have been forced to evolve their underwriting practices. For example, Allianz Life’s eSignature allows the client to review and sign their policy online making it quicker and easier for both the financial professional and policy holder. These accelerated practices will only continue to evolve in 2022 and beyond – not only due to demand from consumers, but also as the industry as a whole develops and adopts technology to help streamline the underwriting process.
A focus on specialized cases
At the same time, carriers are also focused on large or specialized cases that may require specific underwriting skills like large policies, specialized risk, or foreign nationals.
Related, premium finance is one niche segment that has gotten increased scrutiny over the past year. Many carriers, Allianz included, had great momentum with this area in 2021 and reached capacity limits, which are in place to avoid overconcentration of premium finance business which brings additional risks to a carrier that are hard to hedge away.
However, there are significant growth opportunities in the hybrid premium financing space. An increasing number of premium finance vendors are developing programs where the client contributes significantly more to the program than a traditional financing arrangement. Lenders are also becoming more comfortable with premium financing and are willing to look at clients with net worth below $5 million who might utilize these types of programs.
All that to say that while certain policies can take advantage of accelerated underwriting, these types of cases require a more in-depth, unique underwriting process.
Continued product innovation
And while the main benefit of any life insurance policy is the death benefit, fixed index universal life (FIUL) carriers are continuing to innovate on product enhancements that can help clients manage risks in retirement due to things like inflation or market volatility.
Allianz Life’s unique auto lock feature, available on select index allocation options, allows policy holders the potential to lock in an index value, once during a crediting period, and receive positive interest credits. This can help reduce risks during times of uncertainty and volatility, like we have seen over the past several years, and it also helps decrease the probability of receiving zero percent interest.
Innovating is happening at the service level, too. The same digital capabilities that enable some of those underwriting efficiencies can also make monitoring and maintaining a policy more streamlined.
For example, Allianz Life monitors inforce policies for opportunities to lock in interest credits with the index lock feature. If a policy reaches 10 percent or higher, the financial professional receives an email to let them know so they can discuss the index lock opportunity with their client. This eliminates the need for financial professionals to manually monitor targets and makes maintaining the policy even easier. To date, financial professionals and their clients have used the index lock feature in Allianz FIUL policies over 4,000 times with an average locked-in interest credit of 11.06 percent.1
As our industry looks toward 2022, the focus for carriers should remain on helping financial professionals and their clients leverage new efficiencies to make their experience easier starting with underwriting, and throughout the entire life insurance process. [JW]
1) Averaged locked interest rate percentage for clients who applied to the Index Lock feature between September 17, 2019 and June 30, 2021. Potential interest varies by index allocation. Past results are not a guarantee of future results.
Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America.
Products are issued by Allianz Life Insurance Company of North America. www.allianzlife.com.