Digital transformation: How tech is shaping the life insurance landscape

In exploring the current landscape of life insurance technology, my focus is squarely on the present, sidestepping both a reevaluation of the past year and speculative forecasts. 

Two domains are witnessing remarkable growth right now. First, the realm of underwriting is experiencing a significant transformation. Second, digital point-of-sale platforms are revolutionizing the way agents and consumers interact, streamlining the purchasing process like never before. Here, the integration of artificial intelligence and big data stands out as a pivotal force, driving efficiency and precision to new heights.

Artificial intelligence and machine learning are at the forefront of the technological revolution in life insurance. These technologies are used to streamline the underwriting process, making it faster and more accurate. AI algorithms can analyze vast amounts of data, including medical records and lifestyle information, to assess risk and determine premiums in a fraction of the time it would take a human underwriter. Moreover, AI and machine learning are instrumental in detecting fraud, predicting future trends and developing customized insurance products based on individual risk profiles.

I met with Andy Kramer, vice president of underwriting risk and innovation at the M Financial Group. Both Kramer and I participate in developing industry data standards through ACORD’s Electronic Health Records Working Group. I asked Kramer specifically what he sees as the latest trends in life underwriting technology.

“The most material trend in life underwriting that I see is the increasing hit rates of electronic medical records,” he said. “As of Jan. 30, our producers’ average hit rate is 70%, and our fulfillment rate is 48%. This fulfillment rate has doubled in the past year. Many of the decision engines are developing the capabilities to ingest electronic medical records, which should significantly increase the ability to automate underwriting decisions. This won’t happen overnight, but over the coming years we as an industry will evolve from one predicated on reviewing PDF images and manual decisions to one relying primarily on data to make automated underwriting decisions, only reviewing the images as an exception. 

“I understand that many of the rule engines are developing the ability to ingest structured data from electronic medical records, possibly as soon as late 2024.  As AI and natural language processing continue to evolve, the unstructured data will be pulled in shortly thereafter.

“Where I would like to see the industry evolve is to use the rule engines and capabilities developed for their accelerated underwriting to perform screening on their informal applications. Our producers’ primary service to their customers is to identify the best product at the best price to address their needs, and because of that, they need to display offers from multiple carriers. Many carriers have complained that their informal approval rates are lower than desired, and carriers allocate their most experienced [expensive] underwriters to these processes. This seems like a logical place to invest in the next generation of automation.  

“I believe that with a complete part 2 and Rx, a high-confidence informal offer can be made on many cases, subject to very specific medical records. Add electronic medical records, and a more accurate offer should be enabled. This could reduce the number of medical records needed and the number of cases referred to those expensive underwriters.” 

Predictive analytics saves companies millions 

Predictive analytics uses historical data to make predictions about future events, helping life insurance companies identify trends, assess risks and make informed decisions. This technology can forecast life expectancy with greater accuracy, tailor policies to individual needs and identify potential market opportunities. Predictive analytics also plays a crucial role in fraud detection and prevention, saving companies millions of dollars annually.

Developed based on the Fair Credit Reporting Act framework, LexisNexis Risk Classifier aggregates long-standing data sources — including motor vehicle records, public records and credit attributes — to provide added insights to assist underwriters in making confident and swifter decisions based on mortality risk.

In addition to providing a single score in real time, the predictive model provides the critical context and reason codes behind the score. Underwriters can make a more accurate risk assessment and eliminate the need for an applicant to undergo traditional underwriting requirements such as medical testing. This helps lessen applicant frustration and decreases the dropout rate. 

According to Due.com, up to 20% of applicants are known to disengage from the process when underwriters request additional requirements and expand decision timelines. LexisNexis Risk Solutions has announced the availability of LexisNexis Risk Classifier for the supplemental group life insurance market as well.

A seamless experience

Life insurance distributors are leveraging technology to enhance agent recruitment, offering tools to help generate leads and streamline the application process. This technological evolution provides agents with a seamless experience from quoting to applying for life insurance, marking a significant shift from the past.

Brokerage general agents’ websites equipped with disjointed tools and fragmented data are starting to evolve. Comprehensive dashboards have emerged in their place. These dashboards offer a holistic view of crucial elements such as lead tracking, the status of pending cases, commission statements, marketing materials, product details, field underwriting guidance, sales tools, quoting functionalities, and electronic application processes. This low-code, self-service experience simplifies the process for agents to conduct business efficiently.

Furthermore, the integration extends to the agent’s website, enabling consumer quoting and, in some instances, allowing consumers to directly apply for insurance through a consumer-facing eApp. This not only facilitates the application process but also aids in lead generation by capturing potential clients’ information and immediately notifying the agent. All these interactions are meticulously tracked on the agent’s dashboard, ensuring a cohesive and manageable workflow.

This trend is gaining momentum, with BGAs creating these dashboards on their websites and providing agents with comprehensive tools backed by full-service BGA support. Meanwhile, insurtech companies are carving out a significant niche in this space. They have developed digital platforms specifically for agents, securing BGA contracts from leading life insurance carriers across both tier 1 and tier 2 levels. Initially, many of these insurtech ventures embarked on a direct-to-consumer model. However, the realization that the absence of a professional insurance advisor diminished success rates prompted a strategic pivot toward developing agent-centric dashboards.

New insurtech firms enter the market

Today, new insurtech firms are entering the market with platforms designed expressly for life insurance agents. Some examples of these insurtech companies are Plum Life, Covr Financial Technologies and PolicyGenius Pro to name a few. This shift underscores the industry’s recognition of the value and necessity of professional guidance in the insurance process, marrying technological innovation with the expertise of insurance professionals to better serve the evolving needs of consumers.

These platforms aim to give agents and their clients the ability to quote, compare and apply for life insurance and long-term care insurance through multiple top carriers. BackNine’s Quote & Apply, for example, has an eApp that only takes five minutes to complete and allows clients to pull electronic medical records as well as schedule their own exam. It is able to give clients a synopsis of multiple products while redesigning illustrations in seconds, enhancing the sales process greatly, and then proceeds into an application without any redirecting or delays. BackNine provides all agents with their own custom Quote & Apply website that can also be embedded into an agent’s existing site as a white label widget.

A new realm

Integrating underwriting automation with digital point-of-sale platforms ushers the life insurance industry into a new realm of competition, where the speed of processing directly correlates with higher placement ratios. In this innovative landscape, the efficiency of the process itself becomes a standout feature of the product offering. 

Consider, for example, a simplified-
issue term product. During the online application, if we can pose critical medical questions, access and analyze data such as prescription histories, perform checks with the Medical Information Bureau and review motor vehicle records, all feeding into a decision engine, the result could be an instant issue or an expedited underwriting process. This capability significantly increases the likelihood of applications being approved as submitted, thereby boosting business throughput.

Millennials currently represent the largest demographic target for life insurance. This age group shows a readiness to pay higher premiums for policies that offer instant issue or accelerated underwriting processes. A critical challenge in this fast-paced environment involves managing the “yellows” or gray areas that necessitate an underwriter’s review. To address this, carriers are collaborating with third-party vendors to develop streamlined processes. These processes are designed to salvage cases that are ejected from the rapid track, smoothly transitioning them into alternative products without losing momentum.

At the heart of this evolution are insurtech companies, which are skillfully combining AI-driven underwriting with digital sales platforms. This synergy not only enhances the customer experience but also ensures that more applications are efficiently processed and placed, marking a significant leap forward in how life insurance products are marketed, sold and underwritten.

Ken Leibow is CEO of InsurTech Express. He has more than 30 years of insurance industry experience, with an extensive background in insurance technology for distribution and back office systems. Before founding InsurTech Express, Leibow worked for Genworth Financial, Mutual of Omaha, and as vice president of operations at Diversified Underwriters Services. Ken is a leader for industry technology standards, working with ACORD, LBTC, LIDMA, NAILBA, LIMRA, LOMA and IRI. He can be reached at [email protected].