LIMRA panelists suggest best practices for accelerated underwriting

As modern insurance carriers strive to provide accelerated underwriting decisions to keep up with market demand and industry trends, experts on a panel at the Life and Annuity Conference, sponsored by LIMRA, LOMA, SOA and ACLI, suggested best practices to balance performance with risks.

“The whole need for speed for us in the industry is how are we getting decisions out there as quickly as possible, and I’m going to use ‘decisions’ because that encompasses declines and postpones as well,” Rachel Eberle, panelist and certified FALU director, underwriting risk, Munich Re, said.

LIMRA data suggests more than half of American consumers are more likely to buy life insurance using accelerated underwriting because it is fast, easy, unbiased and objective, and lets them avoid medical exams.

The percentage of carriers who planned to implement an accelerated underwriting program also jumped from 62% in 2019 to 91% by 2021, according to LIMRA’s records.

“We’re just really, as a whole in the industry, trying to shave down that time of the underwriting process, because nobody really wants to sit in a queue for two months,” Eberle said.

“You always want to make sure you’re doing a good job of it. You want to make sure that you’re casting the risk appropriately, that you’re treating everyone fairly,” Karen Terry, panel moderator and assistant vice president, insurance research, LIMRA and LOMA, added.

Top AUW recommendations

According to Erin McClintock, panelist and director of underwriting innovation, Nationwide Financial, one of the best practices carriers can follow is to identify their main goal and understand what risks they’re willing to take.

She noted that most insurers want to “have our cake and eat it too” in three categories: cost, consumer experience and mortality slippage. However, insurers were cautioned to focus on just one for their AUW programs.

“It’s either you’re wanting to have the best mortality protection or the best consumer experience, or you’re trying to maintain cost optimization,” she said. “When you look at all three of those, you kind of have to decide which one you want to focus in on, because the reality is there’s going to be some slippage on the other two, if I’m going to be honest.”

Eberle also suggested insurers monitor their accelerated underwriting programs through random holdouts, which she described as the “gold standard,” or through post-issue analysis.

“Companies use a combination of the two, and that really would be the right way to do it. It really helps to see where your program is experiencing mortality slippage…and then it also can help to inform your underwriting processes and continually improve your program,” she said.

Avoiding mortality slippage is one of the major challenges insurers have to contend with in AUW, Eberle noted. However, she added that following best monitoring practices can help them address it.

AI trends

Both panelists also acknowledged the use of artificial intelligence in underwriting, which is a major trend they expect to continue.

They said this is especially the case for direct-to-consumer insurance products, where alternative data sources, predictive analytics and other automated rules or models may replace a large portion or the entirety of a “human touch” in the underwriting process.

“Automated underwriting could simply just be if you have an underwriting rules engine or a predictive analytic model in there that can take your best class and do what we internally call a straight-through processing,” McClintock said.

However, the panelists said they expect carriers to use generative AI in such a way that it will “teach and augment” the skills of underwriters. Eberle added that upskilling team members will also be an ongoing challenge as carriers adopt accelerated and automated underwriting programs.

“The reality is if you’re going to be accelerating more on the front end, you’re going to need to make sure you have a strong forensic underwriting team or post-issue audit team behind the scenes…to make sure that everything is working properly,” she said.

At the same time, McClintock noted that more traditional carriers are also beginning to partner with insurtech companies that utilize alternative data sources as a way to reach new markets.

“The other trend you’re starting to see is a lot more carriers partnering with what would have been deemed as disruptors,” she said. “Truth be told, I think that’s really exciting for us because it hits us in a different market space than what we currently sell to.”

 

Rayne Morgan is a Content Marketing Manager with PolicyAdvisor.com and a freelance journalist and copywriter.

© Entire contents copyright 2024 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.