Accelerated underwriting: an idea whose time has (finally) come?

Accelerated underwriting held the promise of revolutionizing the life insurance buying experience for at least a decade.

That promise is, as yet, largely unfulfilled.

But the COVID-19 pandemic gave those efforts a big boost, as insurers were forced to go all-in on accelerated underwriting for much-larger face amounts. Whether and how to continue that momentum is now the big question facing carriers.

"As we think about the importance of closing the [life insurance] protection gap and making insurance easier to find, underwriting automation and intelligent decision making are critical topics for us," said Jennifer Herz, principal, EY Insurance Advisory Business Transformation and Data Analytics Solutions. "We want to continue to evolve how we distribute our products and services."

Herz moderated a session titled, "Underwriting Transformation: From Automation to Intelligent Decision Making" at the LIMRA 2023 Annual Conference.

A growing market

The earliest accelerated underwriting programs went to market in 2012. Face amounts, which rapidly increased during the onset of COVID-19 in order to meet the demand for socially distant underwriting options, remained in place and even continued growing, post-pandemic.

There has been steady success placing policies, said Rick Buteau, vice president, operations, LIBRA Insurance Partners. The next step is to work closer with carriers to get feedback and reset expectations at a higher level.

Munich Re surveyed the U.S. accelerated underwriting market several times, most recently in late 2022. Highlights of that study include:

• Eligibility, acceleration, and offer rates also increased. However, a large proportion of AUW decisions still have some level of human involvement.
• AUW programs with higher acceleration rates share several common characteristics, with examples including multiple distribution channels and variety of underwriting tools used.
• Testing and adoption of digital health data sources, such as medical claims data and electronic health records (EHRs), is growing among carriers.

According to data presented during the session, age 60 is generally the max age for accelerated underwriting.

Artificial intelligence-driven systems can automatically process customer applications and identify key risk indicators that may be overlooked in traditional processes. Future AI systems hold the potential for cutting time and errors associated with manual underwriting methods, allowing companies to focus resources on other areas.

"If you think about the underwriting process, all the areas that content is generated and the efficiencies that could be brought to that process," said Dave Rengachary, senior vice president and head of underwriting for U.S. mortality markets, RGA Reinsurance Co. "We see a lot of exciting possibilities."

The future use of analytics and AI tools brings the promise of faster and better underwriting. The only question is whether insurers will embrace the potential. The key is for carriers and distributors to work together on an accelerated underwriting program that both can buy into, Buteau said.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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