Difficulties in Testing:
- Many life insurance products require bodily fluid testing that now includes standard panels plus detection of early metabolic markers for various diseases
- While life insurers would normally consider adding a COVID-19 test to their applications, the current limitations on the availability of these tests makes this difficult to implement
As a result, this new demand for insurance is being handled through voluntary disclosure or remains unfulfilled. Repricing and application changes requires new models and new state filings—not known for speed.
Underdeveloped Digital Muscles
While most insurers have built out an online channel for quoting and selling a policy, it usually accounts for only a fraction of the new business volume. Carriers have always relied on in-person advisory meetings with customers to sell their higher-value products. Some carriers have also shied away from building their main product offerings online to prevent antagonizing their broker and agent relationships. With COVID-19 limiting agents meeting face to face with their clients, carriers are scrambling to build out their digital channels. Carriers are finding that most of their life products do not offer efficient, end-to-end online customer journeys. The processes invariably require some level of manual intervention that needs to be performed by someone in an office location that may have been affected during the shutdown. This is particularly problematic for process steps that involve receiving, sorting and underwriting paper applications.
Difficulties in Underwriting Risk
COVID-19 is creating a higher than usual risk that is not incorporated into insurance mortality tables. Incorporating this new risk appropriately into rates and in line with regulations is another important factor for underwriting life insurance in the current climate.
While these challenges seem difficult, breaking them down into different time horizons provides ideas for overcoming them effectively:
Securing the Present: Immediate Next Steps
Incremental changes to improve existing processes supporting new business. This will help insurers deal with the volume volatility in the near term—of the incoming wave of new life insurance policies:
- Provide self-testing medical kits for various conditions and metabolic markers to applicants, and leverage the tele-doc infrastructure to walk them through sample collection or questions
- Rapidly build out and enhance self-service options and online journeys as adoption rises
- Price in the additional risk, collect additional data, and file changes to get the right product for the customer in the market
Secure the Business: This Quarter to Next Quarter
As companies start to adjust to the new way of doing work, insurers need to transform the underwriter experience.
Data from multiple sources must be orchestrated into useable information that underwriters can use to price risk accordingly. Well-designed processes to integrate various data sources before presenting it for underwriting is critical. The last thing we want is to add even more information for an underwriter to review.
- Insurers should examine mortality risk scores to add a new dimension of risk assessment. New third-party data and self-created models with historical data can streamline medical risk assessment and provide non-medical correlations between user behavior and mortality risk. Many industry players have begun integrating such third-party data on demographics, including allowed financial variables and other areas, into their risk predictions. This can help accelerate and simplify the underwriting experience for customers while managing risk
- Consider integrating data from electronic health records or wearable devices to assess risk and to offer life insurance premium discounts for consumers
- Evaluate virtual screening and self-testing as a regular process for complex cases
- Consider implementing artificial intelligence and machine learning content extraction tools that can process handwritten new business and unstructured APS/EMR records to reduce staff needed to physically open and review documents
- Insurers can now readily look at the data and metadata captured from the entire customer life cycle. This is a great time to start modeling this data in its underlying systems and processes to reimagine how to underwrite risk into the new market normal
Futureproof and Shift Business Models: Beyond Six Months
- Accelerate the feedback loop for underwriting: Collecting end-to-end customer and producer data on a continuous basis is essential for enabling agile and adaptive models. Such a process is key to constantly improving the customer experience while factoring in previously unforeseen risks into underwriting
- Use data to launch new products: Insurers can come up with creative products to meet market needs using advanced models. This could include a COVID-19 life insurance product that offers limited coverage right away, increasing to full cover after some time. Accident products offering insurance right away and that then upgrading to term are already seeing success as they provide a better customer experience by pushing medical underwriting to a second, optional step
- Focus on the customer: Use behavior science to ask customers fewer, more relevant questions during an applications to create a better experience. Target the right segments with higher retention, increased crosssell potential, and higher lifetime value. In the current stress-ridden environment, delivering a term policy to the right segment with a great customer experience can create a lifelong relationship
- Hone in on the right coverage: Distribution methods can be supported with AI technologies for agents and consumers to ensure they identify the right coverage for the right length of time. A great way to avoid the fallout that comes from an impulse purchase but not the right fit
As insurers secure the present and start to prepare for the future, they need an end-to-end approach to accelerate transforming their business processes. Delivering the right customer experience with no compromise in risk assessment will need the right mix of AI, Analytics, and Automation. Execution in short sprints can enable insurers to start the journey now--to not just survive but thrive in the new normal.
Accelerated Underwriting, EXL
Asst. Vice President, Insurance Consulting,
Life & Annuities, EXL
Strategic Accounts & Individual Solutions Lead, EXL
VP & Partner,
Global Head of Digital Consulting for Insurance, EXL