Automated underwriting eases the pain of applying for coverage

It’s no surprise that traditional life insurance underwriting historically has been an unpleasant process for applicants. After filling out a life insurance application, prospective insurers often would require blood or urine testing, a step that many consumers might find invasive. After applicants put time and effort into the application process, it would often take a matter of weeks to render a decision on their policies. New advancements in automated and accelerated underwriting represent a golden opportunity for life insurers to flip the script and make their newest customers extremely happy.

In its most basic definition, “automated underwriting” is a tool or system that reduces underwriter involvement in the approval of insurance applications. On one end of the spectrum, it can simply support the traditional full underwriting process. On the other end of the spectrum, it can be the foundation of an accelerated underwriting process.

“Accelerated underwriting” refers to programs that can either replace certain medical requirements (such as blood or urine testing) with alternative data sources, or just remove those requirements altogether. One of the biggest benefits that comes with an automated or accelerated underwriting program is decreased turnaround time, the time between policy application and issue.

A recent LIMRA survey of life insurance found that the vast majority of insurers with automated underwriting programs were specifically aiming to reduce the amount of time it takes to issue a policy. A total of 82% of companies surveyed said they were able to reduce turnaround time using automated or accelerated underwriting.

Life insurance companies often have the consumer in mind while developing their automated underwriting programs. Four out of every five companies with automated systems have specific goals related to the purchasing experience of their applicants. They have seen quite a bit of success in meeting consumer expectations and increasing applicant satisfaction. Interestingly, those accomplishments have not necessarily guaranteed short-term success in meeting sales goals. That said, it is possible that the goodwill generated by increased customer satisfaction will have longer-term positive effects on sales growth.

Looking to the future, some life insurance writers are interested in implementing fully electronic processes. The goal of straight-through processing is to take up a policy application, aggregate all the relevant data, and issue the policy without any human intervention at all.

The speed of these types of applications can be dramatic. Some applicants can measure turnaround time on a stopwatch rather than on a calendar. One out of every three companies already have a fully electronic process that requires no human touch, and more than half of life insurance companies are planning to implement straight-through processing sometime in the future.

Consumers are accustomed to receiving products on demand. Conveniences such as streaming services, two-day delivery and curbside pickup are the norm. In an industry where customers have historically waited days and weeks to determine whether a policy is right for them, some companies are differentiating themselves by offering products that can be sold within minutes. Shoppers are noticing the change and seem to appreciate the update. It will be interesting to follow the next great innovations in life insurance underwriting.

Kevin Tewksbury is assistant research actuary, LIMRA Research Data Services. Kevin may be contacted at [email protected].