By Cyril Tuohy
Despite many life insurers taking a “backseat approach” to mining large data sets, carriers can profit from big data by using more advanced underwriting analytics and by deepening the relationship with customers, a new report has found.
Analytical tools have helped some global insurance carriers increase the number of purchases after a prospect begins an application by between 5 and 15 percentage points, according to the report by the Boston Consulting Group, titled “Bringing Big Data to Life: Four Opportunities for Insurers.”
Carriers that run more relevant data variables through their existing analytical models have been able to replace expensive medical exams. One study involving 60,000 applicants for coverage from life insurer Aviva found that “nontraditional” data was just as effective at identifying health risks as blood and urine tests.
The Boston Consulting report says that SCOR Global Life’s Velogica automated underwriting algorithm has helped the Paris-based life insurer’s U.S. subsidiaries penetrate the middle market with decisions sent to agents in less than a minute in 90 percent of cases.
Fewer than 5 percent of applications require human intervention as the system processes information from the insurance membership data exchange MIB Group, motor vehicle reports and prescription drug databases, the report said.
Automating underwriting and distribution in the middle market is a critical competitive advantage for agents who traditionally shun middle-income customers — those with household incomes of between $35,000 and $100,000 — for wealthier customers where profits are higher.
Advanced analytics also have allowed some insurers to underwrite new risks that carriers could not underwrite profitably in the past, the report found.
Life insurers used to assess the mortality risk of a policyholder only once, at sign-up, according to the report’s authors, Eric Brat, Paul Clark, Pranay Mehrotra, Astrid Stange and Céline Boyer-Chammard.
“Now, trusted insurers can access data regularly volunteered by high-risk customers in exchange for insurance that had at one point been unaffordable or unavailable,” the authors of the report write.
AllLife, for example, underwrites life and disability coverage to policyholders suffering from HIV and diabetes who agree to medical protocols.
Patients are checked every month. Those who follow medical prevention techniques have seen an improvement in their health and boosted their life expectancies. With the policyholder’s permission, the insurer helps manage a patient’s condition by pulling data from doctors and hospitals.
After six months, the immune system of HIV patients improved by 15 percent on average, even without treatment, the report found.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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