I get asked all the time: “What is life insurance straight through processing (STP)?” The answer varies because there are different perspectives based on whether you are a carrier, vendor, BGA, agent or consumer. Life insurance STP has evolved quickly because of the advancement of insurtech, with each piece contributing to the next phase (Term Ticket Model, Accelerated Underwriting—Predictive Automated Underwriting, Digital Sales Platform). So, let’s explore the different types of STP, the benefits today and the trends for the future.
Term Ticket Model
In the Distribution world, Straight Through Processing was defined as a Drop-Ticket or Term-Ticket during its peak years from 2011-2016—running a term insurance quote, then clicking a button to do an abbreviated eApp, and then ePolicy delivery. A term ticket is not a full eApp. The term ticket platform may be a proprietary platform like Legal & General AppAssist or a multi-carrier platform like iPipeline iGO. Basically, it involves filling out questions for most of a Part 1 and replacement information, then asking the best time to call your client. The data and pre-filled forms are sent to a call center at the carrier or a third-party service provider like ExamOne for example. The client gets a call that typically lasts 30 minutes or less. The person conducting the tele-interview asks questions to complete the Part 1 and the medical questions for the Part II of the life insurance application. The interviewer follows a reflective script. Signatures are captured for the medical authorization in some cases, and for all the relevant forms, via Voice Signature. The interviewer also schedules the Paramed exam.
Once the underwriter receives the lab slip from the exam, with the results from blood drawn from the client, and reviews all the necessary information captured in the interview, then they approve the case—unless the underwriter determines additional information is needed like a copy of medical records from a doctor or hospital (APS). If the case is approved as applied for, and the client has provided his or her email address and opted in for eDelivery, then a notification either goes out to the BGA, agent or client via email depending on the eDelivery workflow setup. The eDelivery process for the client is a ceremony of consenting to eDelivery, even though they already opted in, reviewing the policy, paying the balance of premium due either by credit card or EFT, and then eSigning the delivery requirements like an amendment or delivery receipt. The client then saves or prints their policy. The agent is notified, the case is placed in force, and commissions are paid. This is one example of Term Ticket STP, however each carrier has slight variations of the process described above, and different distribution channels, like direct marketers, have a modified version of a Term Ticket STP. Essentially, it’s the same model.
Benefits to the BGA and Agent:
- Cases submitted in good order;
- Handing off fulfillment to focus on sales;
- Faster cycle time;
- Higher placement ratio;
- No chasing down delivery requirements—especially premiums;
- Commissions paid faster;
- Reduce travel costs in delivering a policy; and,
- Seamless experience.
Benefits to the Carrier:
- Cases submitted in good order;
- Control over the fulfillment process;
- Higher conversion rate from interview to exam;
- Faster cycle time;
- Higher placement ratio;
- Ease of doing business; and,
- Reduced costs of mailing and printing policies.
Accelerated and Predictive Automated Underwriting
The carrier’s secret sauce has always been their fulfillment process—which helps differentiate them from their competitors. Accelerated underwriting is a different fulfillment process than term ticket. It began with a process whereby the agent would fill out a complete Part 1 of a life insurance application, including some medical questions, on a carrier eApp platform or a multi-carrier platform like iPipeline iGO. The client and agent would eSign the application. There would be a tele-interview conducted, typically by a carrier’s underwriter. Based on the information captured on the eApp and the answers on the interview, a decision would be made by the underwriter whether a Paramed exam or additional requirements like an APS were needed. The interview includes information provided by services like MIB, MVR and RX to help the underwriter know if the client has any history of medical issues, driving violations and/or is taking prescription medication. These services were pinged during the eApp process. If approved as a non-med, then the policy would be eDelivered within 48 hours.
Many carriers created similar accelerated underwriting programs with criteria to qualify for a non-med including: Specific age range, face amount limit, no tobacco, certain height/weight, blood pressure, cholesterol, and even lifestyle considerations like no DUI. For term insurance, you can get 10, 20, and 30-year term coverage with issue ages up to 60 years old and up to $1 million of death benefit with some carrier products. These programs are not just for term products, but they have expanded to include UL products like index universal life. These accelerated underwriting programs started to grow in popularity in 2017. Some carriers with accelerated underwriting programs include Lincoln Financial LincExpress and TermAccel, Protective Life PLUS, Mutual of Omaha Express, Legal & General APPcelerate, and John Hancock’s Express Track. Other carriers with accelerated underwriting programs are Brighthouse, Principal, SBLI, Nationwide, Transamerica and many more.
Predictive Automated Underwriting is the next step in this evolution. Many of the carriers listed above have modified or created new underwriting programs around specific life products for predictive automated underwriting. What changes in this next phase is that there is no human person touching the case. There is still an eApp submitted with eSignatures, and the MIB, MVR and RX services are automatically ordered, however the results are going into an underwriting scoring system. If the score is favorable than the policy is automatically approved, issued and eDelivered within 24 hours. There are many underwriting systems that can do this scoring such as iPipeline Resonant, SwissRe Magnum, RGA Aura, and ExamOne Risk IQ just to name a few. The science and risk formulas are interesting, but we will save that for another article. To sum it up, life underwriting is the review of a person’s medical history, occupation, lifestyle, and financial status to determine overall life expectancy relative to standard mortality, and that does not change—just the process changes. Accelerated underwriting and predictive automated underwriting are faster, less invasive and easier processes for life insurance, improving the overall straight through process.
Sales Digital Platforms
As we quickly turned the corner from 2018 to 2019, vendors have taken the latest STP (quoting, eApp, predictive automated underwriting, and eDelivery) to another step forward by creating and marketing an end-to-end digital sales platform. Vendors like iPipeline and Insurance Technologies have added a pre-sales component and a post-sales component to the STP. Pre-sale can include integration with CRMs, sales tools and carrier pre-sales workflow. On the post-sales side the platforms are being leveraged for single carrier or multi-carrier inforce services like beneficiary changes, address changes, switching banks for ACH premium payments, and even claim requests. This is just one model of a sales digital platform. New companies are popping up with new sales digital platform models for STP like Quotacy, and Quote & Apply by BackNine Insurance.
NIMBUS has created a digital experience for a straight through process (STP)–Life Click-to-Buy. What’s different from the traditional term life STP is that this digital platform has a flexible design to fit several sales models. The end user is the consumer, not the agent, with the same new business STP (no meds, no underwriter, instant policy approval, instant issue and delivery). There are several types of insurance, like term insurance and final expense products, being offered, some of which are specifically designed for the platform by many top life insurance companies.
The user can run a multi-carrier quote for example and fill out the application, eSign, and submit the premium payment. The system will qualify the client for the insurance they are applying for from the answers to some basic medical questions and the automatic ordering of RX medication prescription check, Medical Insurance Bureau check (MIB), and motor vehicle report (MVR). The results are instantly scored. This is a predictive automated underwriting process that we discussed above. The user experience takes about 13 minutes from quote to issue. If the score does not come back favorably for an instant issue, then there is a workflow that can redirect the customer to alternative life products.
This truly is a sale-to-issue process in the cloud, optimized for both laptop and mobile devices automatically. It is designed to plug via API easily into any website. The foundation from a sales perspective is to fit multiple sales models, therefore distribution channels like financial institutions, brokerage general agencies, direct marketers, and retail life insurance agents can all take advantage of the platform. The uniqueness of NIMBUS is that they have removed the barrier of the technology cost! Their revenue model is to participate in the commission hierarchy. They only get paid when business is placed. There are no setup fees, no license fees, no maintenance fees, and no transaction fees to using the base platform and training. There are consulting services you can purchase for additional customizations. Learn more about NIMBUS at nimbusinsurance.com.
Future of STP
The adage that life insurance is sold and not bought is getting redefined. The reason is two-fold: One, life products have been simplified; and second, the streamlining process. Because of the low cost, quickened experience, and easy accessibility from any device all stemming from the advancement in insurance technology (insurtech), STP will continue to disrupt the traditional sales process. The timing is perfect, as the biggest buying group of life insurance will be Millennials who prefer self-service! These new consumers still need advice from an agent, however as an on-demand model. Selling and processing life insurance applications with a straight through process will continue to grow and evolve. To learn more about life insurance straight through processing, please visit InsurTechExpress.com and then select STP under “Solutions.”
Life Inforce Policy Management Automation
It’s finally here—online tools for life insurance agents and clients to do basic tasks like change beneficiaries, look up paid-to-date information, see account values, and address changes without having to fill out a form or call a customer service phone number. It’s no longer a one-off but being implemented by most life insurance carriers today. You are also now seeing Artificial Intelligence (AI) chat tools for clients to get the information on their policies or to answer basic insurance questions on demand. Readily available for agents is new technology leveraging Big Data Analytics to analyze a policy resulting in new sales opportunities with products that better fit your client’s needs.
Policy Review
As an agent, you should do a review with your client on their life insurance policies at least once a year. Policy review should also occur when there is a life changing event or a family’s situation has changed, which could result in the need to increase or decrease coverage. Interest crediting rates on certain policies are much lower today than when the policy was first purchased. This can affect the future performance of your client’s policy, which could result in having to pay additional premium dollars to meet your client’s needs. Because people are living longer or if your client’s health has improved, then they may need to make an adjustment on their policy. On permanent insurance like universal life policies, loans and withdrawals and other changes to the policy, like premiums not paid as planned, may have impacted the current performance. Of course, if premiums have increased then you should do a policy review with your client. If the client is an owner or co-owner of a business and that business has grown or changed, then that is a compelling reason to do a policy review. Occasionally a life insurance company’s ratings or financials have changed, which may no longer meet your client’s risk tolerance.
The objective of the policy review is to do a thorough analysis of current insurance holdings vs. current needs. There are also industry and product changes to consider as well. I would recommend to carefully look at older life policies because of the way life insurance is designed today—the current changes in pricing, and how it’s medically underwritten, may have a significant difference in 2019 compared to five, 10 or more years ago. Also, you need to be up to date on the current tax, business and estate law changes. Higher life expectancies (mortality tables), lower interest rates and dividend crediting rates affect performance. There are new products on the market today to consider like indexed universal life products. Look at your client’s goals: If their goals are the same, is there a better insurance product for them today? If their goals have changed, then what’s available today to best meet those financial needs? For living benefit needs there are linked benefit products to consider. Should your client consider a way to financially maximize a policy he no longer needs by looking at a life settlement option?
Why Request an Inforce Illustration?
Over time the cash value and credited interest on permanent life products will be different with the inforce illustration than the original illustration. The inforce illustration will take into account the interest rate that has been credited to the policy and illustrate out future values based on the new current illustrated rates. For example, if someone has purchased an indexed universal life (IUL) policy and the cap rate has decreased, the new inforce illustration will reflect a lower interest rate than what was on the original. The original illustration might have used an 8.4 percent assumed rate of return, but now with a lower cap it might reflect a 7.12 percent as the new assumed rate for the future. It is important to remember that illustrations are just projections and the inforce illustration will show how the policy has actually performed and ballpark how it will most likely perform in the future.
Client Account Portal
Most life insurance companies have created self-service client account portals. Carriers like Prudential, John Hancock, Protective Life, and many others offer a client account portal with self-service functionality. Once the policy owner logs into the carrier’s website, they typically see their life insurance policy information overview: Product, policy number, insured name, death benefit amount, account values, policy owner, policy date, policy status, primary and contingent beneficiaries, and policy owner contact information. You can get a more detailed breakdown of the coverages such as riders for example. One of the key pieces of information is related to the premium starting with the paid-to date, current premium mode including premium payment history, receipt of last payment and the next scheduled premium due.
Self Service
The typical self-service option begins with the ability to make a premium payment or setting up recurring payments doing an automatic draft “ACH” from the policy owner’s checking account. This includes managing payments like editing scheduled payments. Policy owners can update their mailing address online and change beneficiaries (primary and contingents). Services that require a signature, like for a change of owner for example, may require a form to be filled out and sent in, or many carriers are implementing secure eSignature to make it completely self-service online. All service requests or changes to a policy have status tracking online and automatic update notifications via email. If a form needs to be completed, then you can access forms from a form’s library. Copies of statements like annual reports on UL policies, tax forms, and notices that were previously mailed or emailed are also available on the client account portal to access. During my research I only found a few carriers that have a PDF of the life insurance policy accessible online.
If the life product was an indexed UL or variable UL, then some carrier self-service portals allow you to do reallocations, loans and withdrawals, index strategy selections and fund transfers online. Carriers are very good at providing FAQ’s, Online Help, Q&A Chat using AI, Customer Service contact information, and basic insurance educational media. If you have more than one policy or even a different line of business like an annuity contract, then they are accessible with a single sign-on to the carrier’s client portal for self-service management.
New Sales Opportunities—Vendor Inforce Management Platforms
It is expensive and time consuming to monitor inforce policies. Many sales opportunities are left on the table because they were missed. Agents are reactive hoping that their clients will contact them. A recent study* shows that:
*Source Proformex
Proformex is a platform built for the life insurance industry that revolutionizes inforce policy management for independent agents, advisors and trustees. Their life insurance policy management software provides powerful portfolio analytics, individual contract monitoring and easy-to-use policy review reporting tools, putting oversight and control within easy reach. Proformex helps you monitor, analyze and manage the performance of policies in a single, distribution-agnostic platform.
Proformex’s key features are:
Visit Profordex at www.proformex.com.
Another vendor is Insured Connect, which is a cloud-based platform that connects carriers, distributors, advisors and policy owners into a single ecosystem. Insured Connect’s platform is called “NIC” and it is comprised of four main applications for the four customers in the insurance distribution chain: Insurance carriers (“NICcarrier”), distributors (“NICdistributor”), advisors (“NICadvisor”) and policy owners (“NICpolicyowner”). The four applications create an ecosystem for the management and servicing of inforce policies. Insured Connect works behind the scenes as a “secure data transfer” partner, or “service bureau” to the industry, making it easier for insurance companies to push their data to one source while providing distributors and advisors with a single solution to access all their inforce business. NIC operates on a modern cloud-based and open architecture that enables carriers and distributors to integrate their apps, tools and business services, making it much easier for everyone to do business. Visit Insured Connect at www.ins-connect.com.
Life insurance policy management automation is not only providing value to clients and life agents, but also helps carriers reduce their policy service costs, eliminating paper and reducing phone calls while creating secure, quick and easy access to self-service tools. Resource platforms using Big Data can help clients analyze their current life insurance policy and recommend changes that better fit their needs and current goals often resulting in new sales opportunities for life agents. New emerging technologies, tools, and trends for Life Inforce Policy Management can be found at InsurTechExpress.com.