New Benefits And Challenges In Automated Life Underwriting

Automated or electronic new business and underwriting systems allow life carriers to automate the processing and underwriting of new life insurance policies. The systems combine evidence data such as lab reports, APS, electronic health records, Rx Scripts, MIB reports, MVR, and financial background checks along with other underwriting requirements and help evaluate the information to assess the appropriate rate class of the proposed insured. An underwriting decision is the ultimate goal.

Today predictive analytics and scoring systems are being integrated into the underwriting rules engines. There are lifestyle scores and electronic health records (EHR) eliminate the need to draw fluids. The simplified underwriting process with an accelerated underwriting program has had some difficulties. Even though many clients may qualify for accelerated underwriting programs by age and face amount only about 33 percent actually get approved for the carrier’s accelerated underwriting programs. This is because of the results of the medical questions answered by the proposed insured and a result of the data collected through Rx checks and MIB. There are instant issue life products that are non-med and not just for the young and healthy and not just final expense with low face amounts. These products in general are up to 15 percent more expensive in premium compared to the simplified issue term products. There is a demographic of consumers that will pay more for speed and convenience.

There are distinctions between raw data, triaged data, scoring, and automated decision making. My analogy is a mixologist who make cocktails at a bar. The vast amount of data available and tools used by paramedical companies, insurtech companies, and reinsurers result in several models that are implemented in the digital point of sale. Predictive analytics, risk assessment applications, AI technology, algorithms run on Rx Data, MIB, Electronic Medical records, are all the components that make automated underwriting possible. We are at the beginning. Automating life underwriting is far from being mature. There are industry initiatives working to normalize/standardize both the data like Rx scripts, EHR, and lab results along with standard data transactions utilizing APIs. Yes this opens Pandora’s box to unlimited possibilities and challenges in the future of Automating Underwriting. Is the tail wagging the dog or the dog wagging the tail when it comes to underwriting and driving life insurance product design? I believe we need more data scientists and possibly enhanced actuarial tools to work out new product design and pricing.

Automated underwriting also opens up the door to fraud. An example: If a young healthy person passes all question and data tests that gets them through the accelerated underwriting process. The client could have said “no” to tobacco use, and because there are no fluids drawn significant premiums would be lost to the life carrier. When creating automated underwriting, fraud possibilities have to be explored. Though there is a solution to the tobacco issue mentioned above. A software solution provider developed a voice analytical tool, which is in production today with some call centers, that has an 85 percent accuracy of determining if someone is a tobacco user utilizing voice analytics. When we look at the digital point of sales process for life insurance, as automated underwriting and instant issue is becoming more in demand, an evaluation of the entire process needs to be examined for possible fraud. Another technology that was recently implemented is automatically comparing data received from Rx checks and MIB, etc., and comparing them against the Part 2 medical questions answered by the proposed insured. This is done in real time. Here is an example: Let’s say the client answered “no” to diabetes, but the Rx check shows that he/she is taking diabetic medication, then this is flagged by the AI technology platform putting the question back in the lap of the proposed insured with the option to update the answer to the diabetic medical question. The data is then sent in-good-order to the carrier.

Another level in automated underwriting goes into data collected from wearable and wellness apps (iOTs) Internet of Things. This is a new trend. Tech companies that create devices and software also have added services. Services can include 24/7 virtual human support along with digital tools. Also there are medical prevention and diagnostics. These tools reduce risk and get ahead of health challenges and form self-triage digital HRAs to personalized screening plans to early diagnosis and detection. There is medical management and navigation. This is continuous and multidisciplinary responses to serious and complied medical conditions, from musculoskeletal, cancer, cardiac, Covid-related issues and more such as holistic consultations and navigations of treatment. Rehabilitation which supports the path to recovery, from multidisciplinary advice to personalized rehabilitation managment services. Mental health is a growing issue. Services that navigate the complex cadre of mental health from diagnosis to treatment to long term management. Finally there is tele-health. This service is immediate and complete nationwide access to leading medical teams across specialities for responses and prescriptions to every-day health needs. As you can see wellness is more than how many steps you walked today and your BMI. The analysis of this data could be factored into an automated underwriting decision.

In today’s world, where the only thing constant is change, that original vision has been expanded to include more services and technology capabilities designed to help clients adapt quickly and in a cost-effective way. Insurtech companies and reinsurance companies have invested heavily in technology platforms to create a foundation for the next revolution in life insurance. No-Code platform gives you all the tools needed to build a highly secure, complex application that efficiently collects voice and electronic data without writing a single line of code. The result is a vastly reduced time to market with no initial or ongoing maintenance costs making the total cost of ownership substantially lower than status quo solutions. A platform’s ability to support powerful reflexive logic makes an underwriting rules engine extremely efficient in collecting all information needed to make a point-of-sale decision. The capabilities and flexibility of these platforms allow customers to use the technology as their single solution or as a tool to support and enhance current technology solutions they already have in place.

Looking under the hood of the underwriting process itself there are comprehensive platforms not just for digital decisions but also for intelligent automation, application development, and customer engagement. Digital decisions capabilities on a workflow platform allows software developers to define decision logic that includes analytics and can be tightly integrated with case management and underwriting workbenches at the carrier’s back office. This process automation can extend to an advisors CRM or distributors agency management system. Taking it even another step further is an intelligent automation platform that includes customer engagement applications, such as a decision hub, marketing sales automation, customer service and field service. Leveraging this technology redefines what is Straight-Through-Processing. We can’t forget that every step of the process must meet security and compliance standards protecting personal health information. Here I have demonstrated that the future of automated underwriting has powerful benefits and challenges. This impacts the digital point of sales process, new business underwriting process, and insurance product design. Wellness monitoring data can also drive a more favorable future underwriting decision for existing policy holders.

Image by Gerd Altmann from Pixabay

As Founder and Chief Executive Officer at InsurTech Express, Ken brings more than 34 years of insurance industry experience, with an extensive background in insurance technology for distribution and back office systems. Prior to founding InsurTech Express, Leibow worked for Genworth Financial, Mutual of Omaha, and as vice president of operations at Diversified Underwriters Services, Inc.

As Chief Operating Officer of Integrated Insurance Technologies, Ken built the largest life insurance data exchange hub in the industry, processing over one million policies per year and $30 billion of annuities (now owned by Oracle, Inc.). Some of Ken’s key initiatives he implemented include innovation in quoting and illustration tools, CRM’s, agency management systems, eApp platforms and ePolicy Delivery for long term care, life insurance and annuities.

Ken is a leader for industry technology standards, working with ACORD, LBTC, LIDMA, NAILBA, LIMRA, LOMA and IRI. In 2019, Leibow was appointed to sit on the ACLI Innovation Committee.Ken is on the ACORD Life & Annuity Program Advisory Council and won the ACORD Leadership Award in 2020 and ACORD Community 50th Anniversary Award in 2020. He is a past winner of the NAILBA Chairman’s Award and NAILBA’s ID20 Award.

Leibow can be reached by telephone at 402-740-7356. Email: ken@insurtechexpress.com.