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GLOBAL INSURANCE INSIGHTS

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COVID-19 May Change Life Insurance Business and Underwriting Forever

sHOW COVID-19 MAY CHANGE LIFE INSURANCE NEW BUSINESS AND UNDERWRITING PROCESSES FOREVER

To avoid unnecessary exposure to others, many people are exploring new ways of getting items they need during the COVID-19 pandemic. For example, I recently purchased cat food over the internet, something I’d never really considered doing before. I’ve also heard plenty of stories from others who are doing everything from streaming first-run movies, to having groceries delivered, to keeping in touch with family via video.

Maybe we’d all be doing these things eventually, but there is no doubt that COVID-19 accelerated the pace of change. As quarantines, self-imposed or otherwise, are lifted, I suspect many of us will continue to follow some of the new personal behavioral patterns we’ve developed.

The same may be true for business. For example, there’s been a lot of buzz around the work-from-home movement. Employers are starting to realize that they may have to rethink where and how employees work together. But, there are other significant changes happening in all kinds of areas that aren’t getting as much press.

A Change for the Better in Underwriting

Most of you reading this are likely familiar with the traditional process of life insurance underwriting. The consumer fills out an application, providing high-level information and answering a few disclosure questions. To ensure underwriters receive all necessary information to effectively review the applicant’s profile, a paramedical exam (paramed) is usually required.

The exam is an interview conducted with the applicant in order to collect pertinent medical history details, as well as body measurements, blood and urine samples. The entire process, from application to approval, can take weeks.

As a result of COVID-19, time isn’t the only issue impacting applicants. It’s one thing to go to the doctor if you’re sick, but letting a stranger into the house during a pandemic may be seen as an unnecessary risk. Some applicants would rather delay buying life insurance for the time being.  

Fluidless underwriting is one alternative that seeks to enable the underwriter to assess the risk of an applicant with data that can be gathered from a variety of sources without requiring a paramed. Some sources, such as the MIB (Medical Information Bureau) report, Rx histories, and MVRs (Motor Vehicle Records) are well established. More recently, new analysis has uncovered links between other commonly available data and mortality. For example, credit behavior has shown to have a correlation to mortality.  Although fluidless evidences alone will never provide as complete a picture of an individual applicant’s health to the extent a paramed or Attending Physician Statement (APS) do, the additional views into lifestyle that fluidless sources provide are an ever increasing component of the analysis.  

Reducing the Risk with Fluidless Underwriting

Prior to COVID-19, fluidless evidence sources were utilized in a way to complement the traditional underwriting process. Fluidless evidence could be substituted for the paramed for some applicants, but this evidence wasn’t seen as complete enough to serve as the primary source of evidence across the majority of applicants.

Evidence sources provide critical information underwriters need to make a decision.

Complex underwriting using fluidless sources requires intelligent technology that automatically collects and combines data from multiple sources and then assesses the risk using sophisticated algorithms. With the further application of machine learning and AI, these algorithms will continue to get better at predicting risk.


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Looking Ahead

We would reasonably expect to see a growing interest and awareness by consumers in the need for life insurance.  Life insurance carriers that are able to incorporate responsible use of fluidless evidence sources to accurately, comprehensively, and quickly assess individual risk could improve their underwriting process as a result of the pandemic. Accelerating the use of fluidless evidence sources in underwriting, as well as the technology that processes these evidence sources efficiently, will allow many carriers to emerge from this global crisis with more robust, consumer-friendly, more intuitive underwriting practices than they had just 12 months ago.

 

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Written by: Bruce Bosco

Bruce Bosco has 30+ years’ experience in the global insurance solutions marketplace. Throughout his career, Bruce has developed sound operational knowledge of the core insurance business processes that drive the insurance industry. These include: product development, new business & underwriting, and policy administration, as well as the multitude of applications that serve those core business processes. Complementing his operational knowledge, is a keen historical perspective on how the solutions and the industry have developed over the years as well as a forward-facing view as to what is on the horizon.