Get Ready For The Age Of Application Triage

Insurance agent product hounds had better get ready for the age of “application triage.”

The term refers to accelerated underwriting for fully underwritten policies. It’s an underwriting model on the cusp of going mainstream, according to an industry expert.

Under this model, commission checks are cut within on a weekly basis instead of on a quarterly basis, which is about all an insurance agent can ask for.

Life insurance carriers that aren’t thinking of about “application triage” will soon find themselves in danger of losing agents to the competition.

“This is one big trend in terms of life insurance products in 2016,” Andy Ferris, a Chicago-based director with Deloitte Consulting, told InsuranceNewsNet.

In fact, fully underwritten accelerated underwriting has been in the market for almost two years. It was introduced when The Principal Financial Group launched its “Principal Accelerated Underwriting” model in February 2014.

The life insurance approval process can take anywhere from 30 days to several months. But The Principal’s model slashes that approval process to 48 hours. The process is available for term, universal life, indexed universal life, variable universal life and survivorship universal life.

Eligible applicants include individuals ages 18-60 applying for any retail life insurance products for face amounts up to $1 million.

The Principal’s program uses data to eliminate lab testing and exams for an estimated 50 to 60 percent of Preferred and Super Preferred applications who qualify based on age, personal history and face amount requirements.

Fully underwritten accelerated underwriting isn’t quite the same as simplified underwriting, touted by carriers as an easier and faster way to obtain coverage.

Simplified underwriting is faster, but it’s also more expensive than fully underwritten issuance. As a result, comparing simplified underwriting with accelerated underwriting isn’t an apples-to-apples comparison, Ferris said.

Applicants issued under the application triage model pay the same price as they would under the standard fully underwritten model for the same product. The difference is that applicants obtain coverage much quicker and the agents get paid faster.

“In certain segments of the business for independent producers, we are approaching a situation where if you as a carrier are not offering application triage, producers may not want to do business with you, because advisors will not want to wait,” Ferris said.

Advances in predictive analytics are making it feasible for more carriers to offer accelerated underwriting. In a low interest rate environment with lackluster life insurance sales, carriers have every incentive to look for ways to boost sales.

Carriers are at the point where, relying on the basic four primary data sources — the application for life insurance, prescription medication usage, Medical Information Bureau (MIB) information and motor vehicle records — they can determine whether they can waive certain medical exams for certain healthy individuals. Under this system, carriers potentially avoid conducting blood and urine analyses, which are considered “invasive” procedures from the perspective of life insurance distributors.

Unleashing the power of predictive analytics on new applicants, however, is only half the story in 2016.

The other half involves carriers cluster strafing the in-force life insurance blocks with analytics arsenals to find out which policyholders are likely to be receptive to new product offers, if not structural changes to their life insurance coverage.

Properly executed, agents who target the right clients with the help of the carrier’s analytics solutions have an opening to double-down on the face value of the life policy the next time a client walks in the door.

Clients whose circumstances have changed — they’ve added to the family with another child, or have moved into a bigger house, or lost a job — are the best prospects for agents to approach with a new or revamped life insurance solution.

“Predictive analytics can help identify the easy sales – those who are both likely to need additional coverage, and likely to qualify for such coverage,” Ferris said. “That’s changing life and annuity manufacturing design and distribution.”

Predictive analytics isn’t all that new. Many longtime industry watchers say it’s just another phrase for “data mining,” which was all the rage 20 years ago as a customer segmentation tool. However, computing power and database management has improved immeasurably since 1996, about the time the Internet was starting to break through to consumers.

So which carriers are ready to put predictive analytics to their ultimate test and issue a long-term promise to “make whole” based on four or five publicly available data sets?

Ferris isn’t saying, but perhaps the past 18 months provide a hint.

John Hancock in 2014 announced the launch of a simplified variable universal life (VUL) policy. In addition, Lincoln Financial Group, MetLife and The Phoenix Cos. have announced changes to their respective term life insurance products over the past two years in an attempt to reach younger buyers.

“The analytics ‘arms race’ is intensifying, driven in part by financial pressures, consumer expectations, competitive actions and information availability,” said a Deloitte report about changing customer expectations.

That race is about to explode into the industry’s consciousness in a very public way so look out for more announcements and fireworks in 2016.

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].