Barriers to Accelerated Underwriting Beginning to Crumble

Accelerated underwriting began breaking down the remaining barriers to a digital world of life insurance distribution last year thanks to new technologies and services provided by large insurers and start-ups alike, according to a new report.

Life insurance application and issuance, two of three steps necessary before buyers receive coverage, have been digitized for years.

But the in-between step – an invasive paramedical exam that often takes several weeks to schedule and administer – has remained the sticking point to an entirely digital life insurance process buying process.

That step is gradually becoming automated through accelerated or automated underwriting, and as insurers get better at processing more data to price a 30-year policy in a way that reflects the risk appropriately.

“Using accelerated underwriting, digital agencies are now able to issue policies directly to potential consumers,” wrote Scott Hawkins, director, insurance research, at Conning, an asset manager to insurers, in a new report last week on life insurance distribution trends in 2017.

“In 2016, digital distribution began to take off,” he wrote.

Products offered by new companies range from screening applications to helping insurers automate the life buying process, he wrote in the annual update on the state of the life and annuity distribution and marketing.

A Hint at Warp Speed

Underwriting engines and processes offered by major insurers go by a plethora of names, often making references to acceleration, according to the website www.termlife2go.com, which lists the “10 best” accelerated underwriting companies and policies on the market.

American National’s “Xpress Plus,” Brighthouse Financial’s “Enhanced Rate Plus,” and Fidelity Life’s “RAPIDecision Express,” hint at the warp speeds of underwriting engines. There are many others as well.

Life insurance agencies are demonstrating a strong interest in developing direct digital sales, Hawkins said. Insurers and agencies are investing heavily in direct-to-consumer marketing channels as these channels offer a way to penetrate an underserved life insurance market.

The industry also knows that if it wants to reach millennials, who are used to shopping online, it’s doing to have to do a better job of speeding up the life insurance sales process. Surveys show young buyers don’t have the patience to sit through a drawn-out buying process.

A report released Tuesday by the insurance consultancy Novarica found that 65 percent of 23 life and annuity companies surveyed said digital initiatives factor as a “top IT (information technology)” priority for 2018 and beyond.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].