T
he way we determine insurability in life insurance has changed radically in just the last few years. Our goal is to realize the three essential mandates of senior management: do it faster, control costs, and make the process more customer-friendly. This article will highlight the most impactful developments and their implications for our industry.Accelerated Underwriting
Far and away the most transformational change is a novel paradigm called accelerated underwriting. Already embraced by more than a dozen prominent carriers, the pace of additional rollouts is certain to escalate in the months ahead.
In today’s competitive business
climate, effectively underwriting
your life insurance products
is more important than ever.
To do just that, you must employ
leading-edge risk appraisal
tools and approaches. Here are
some good ideas.
TRANSFORMING
LIFE UNDERWRITING
By Hank George, FALU, FLMI, CLU President, Hank George, Inc.
www.loma.org 9
COVER STORY
COVER STORY
Accelerated underwriting is a triage process. Applicants likely eligible for preferred risk status are screened with tele-interviews, motor vehicle and pharmacy (Rx) reports, Medical Information Bureau (MIB) records and other rapid access resources. If their preferred status is affi rmed, the policy is issued—without the need for paramedicals and laboratory tests. Some insurers offer this unprecedented opportunity through age 60 and for as much as US$ 1 million of coverage, often at the same premium rates previously reserved solely for fully underwritten business. Nonetheless, several critical questions remain to be resolved.
First, will expense savings and higher placement rates offset the inherent risk of heightened antiselection, which is defi ned as applicant nondisclosure of health-related and other
information germane to insurability? Foregoing screening for tobacco use and HIV infection, for example, could have adverse mortality implications that are largely eliminated by blood, urine and oral fl uid testing.
Second, will the sheer number of companies introducing this risk triage approach reach a tipping point whereupon oth-ers in at least the brokerage market fi nd themselves compelled to do likewise or be at a major competitive disadvantage?
The next two years should reveal a great deal about the future of accelerated underwriting.
uper implifi ed Underwriting
A new survey of 95 U.S. life insurers showed that 67 percent have already introduced super-simplifi ed products and an additional 21 percent are now committed to doing so.
One in four carriers will issue at least US$ 250,000 of coverage on a super-simplifi ed basis through age 45 and 70 percent anticipate a steady increase in simplifi ed business over the next fi ve years.
The majority has an average application-to-issue interval of three or fewer days, contrasting starkly with 14 to 22 days on fully underwritten business.
More than 90 percent require MIB and Rx reports to underwrite this business, while two-thirds either have or are considering an underwriting “engine” to facilitate straight-through processing of cases that do not require review by an underwriter.
The use of personal purchase records in super-simplifi ed underwriting has been advocated in some quarters. The Fair Credit Reporting Act does not approve this practice. Fortu-nately, all but two insurers have wisely opted against the use of personal purchase records to assess these risks.
There is no reason why preferred risk cannot be offered on simplifi ed business. Nevertheless, the substantial majority have neither embraced nor considered the merits of this enhancement.
Reinsurers have gotten on board with super-simplifi ed and nearly half of direct companies make use of reinsurance in this context.
We now have the means of effectively using diverse distribution channels. Doing so greatly enhances our capacity to serve the needs of the long-elusive middle market.
Another opportunity conferred by super-simplifi ed life in the middle market is providing widespread customer access to highly affordable critical illness, chronic illness, disability income and long term care coverage via riders.
Chronic and critical illness riders should both have sub-stantial appeal because of the risk of incurring formidable medical expenses in the absence of a single-payer national health care system under age 65.
The future of simplified life is now assured. The only questions are how far it will extend in terms of ages insured and amounts of coverage available.
Given the absence of tobacco and HIV screening together with additional value conferred by other tests and physical measurements, it is unlikely super-simplified underwriting will extend much beyond age 45. On the other hand, one would not be surprised to see seven figures of coverage available at ages 18 to 45.
Electronic Health Records
By all indications, we are closing in on access to electronic health records (EHRs) in a manner that will greatly reduce if not eliminate the current 12- to 14-day waiting period for an attending physician’s statement (APS).
It is uncertain, however, what the cost will be to insurers. We now pay more than US$ 50 per APS. Is there reason to expect this to decrease with the advent of electronic transmission?
The prospect of having immediate access to medical records has profound implications.
By consensus, the APS is regarded as the “gold standard” underwriting resource. Moreover, the problem of the doctors’ often illegible handwriting will no longer be a concern and the formatting of content will be consistent.
There are also several concerns with EHRs that could limit their value to underwriters.
There are a number of so-called “sensitive conditions” with substantial importance in underwriting, including psychiatric conditions and drug/alcohol use disorders.
While nearly all EHRs prevent patients from directly altering their records, it is well known that they can influence their physicians in this regard; and with EHRs, patients can review their records before they apply for insurance.
If EHRs are comprehensive enough to include details of specialist consultations, pathology reports and other essential elements, their value will be maximized. Conversely, their utility would be compromised if underwriters had to contact additional physicians to gather in such information.
To make the creation of electronic records more affordable, health care systems often retain “scribes” working for outside contractors. Reports in leading medical journals raise issues over scribe service outsourcing as regards both the extent of their training and the degree of oversight on their work.
There is also the matter of extensive redundancy in these records, protracting the time needed for underwriters to review them without overlooking important content.
Hopefully these and other potential drawbacks will not jeopardize the payoff from EHRs.
The other hypothetical question that arises with EHRs is whether insurers will find it expeditious to get these records on all late middle-aged and older applicants. If they do, what impact will this have on the extent to which they continue using other underwriting assets currently deployed for screening?
If they go too far, eliminating key components of conven -tional screening in the elder market, the adverse mortality impact will be substantial. This is one setting where throwing out the baby with the proverbial bath water is a tempting but ill-advised decision.
Timely Changes in Underwriting Tests
Until relatively recently, insurers relied upon certain screen -ing tests that greatly complicated the underwrit-ing process. These include chest x-rays, treadmill stress tests (TSTs) and resting electrocardiograms.
Fortunately, chest x-rays have been almost completely eliminated. The use of TSTs has declined precipitously and it is now largely confined to multi-million dollar applications at older ages.
Resting ECG use is decreasing, albeit far too slowly. The NT-proBNP blood test is less costly than an electrocar -diogram and far superior in terms of identifying likely cardiac dysfunction. It is likely that this test will replace screening older applicants with ECGs in the near future.
Beginning at age 70, most insurers require cognitive and frailty screening. The tests they use have various drawbacks. Indeed, the one used most widely in a cognitive context, called the Clock Drawing Test, has been shown to be all but worthless. There continues to be substantial pushback against these tests from both advisors and applicants.
“
The next two years
should reveal a
great deal about the
future of accelerated
www.loma.org 11 A recent comprehensive research
paper revealed that the cystatin C blood test could be a satisfactory alternative to costlier, labor-intensive cognitive and frailty tests. This test is available from both industry laboratories.
Novel Underwriting Resources
We now enjoy affordable, highly cost-effective access to a menu of financial and other non-medical information accessed elec -tronically. These assets are merged into what we call electronic inspection reports. One component is credit scoring.
Several studies show that poor credit standing is a harbin-ger of higher mortality. For this reason, plus their low cost and instant availability, some insurers now use credit scores in life underwriting.
An argument can be made for excluding one subset of credit score content: those components related to medical care costs. This is because calamitous events such as heart attacks, strokes and cancer affecting family members can exert a dra -matic and longstanding effect on an applicant’s credit score without adversely impacting that applicant’s mortality risk.
According to one major provider of e-inspections, exclud -ing credit scores from their profile has no appreciable impact on its value as a mortality risk marker.
Given the concern over medical expense debt, coupled with the potential for regulatory pushback against our use of credit scores, perhaps the best course of action will be to forego their use as a component of e-inspection reports.
Another proposed resource is biological age determina-tion based on computer-mediated analysis of facial features. This is said to be readily feasible based on submission of a “selfie” taken by the applicant.
Biological age per se has a stronger correlation with life expectancy than chronological age. However, there are issues with the insurability impact of the facial features pinpointed with this method.
An in-depth review of the medical literature pertaining to these features—such as wrinkles and the effects of excessive sunlight exposure—failed to show any significant correlation with excess mortality.
There are additional concerns regarding customer percep -tion, the potential for antiselection and whether this could compromise our commitment to abstaining from underwriting based on factors linked to race, ethnicity and sexual orientation The thinking here is that face age imaging has little traction as a potential alternative to conventional insurability screening practices
The potential roles of wearable devices in clinical medicine are
liter-ally too numerous to imagine! Appli-cations are emerging for everything from monitoring patients at high risk for cardiac sudden death to facilitating healthful living practices.
One major insurer currently offers various financial incentives to applicants who commit to wearing the FitBit device. From a mortality risk perspective, the poten -tial benefits from sustained and fully compliant accelerometer use are impressive. The only caveat is whether long-term use on this basis will be largely limited to individuals who already qualify as preferred risks.
The real value here would accrue from sustained FitBit use adherence by insured persons needing to make healthful behavioral adjustments such as getting more exercise, losing weight and so on. Thus, the question is whether this subset of initially motivated users will persistent rather than lose their motivation. Time will tell.
“
There is no reason why
preferred risk cannot
e ered n s m fied
business.
”
Pharmacy Records
Rx records rank among the most impactful underwriting tools in the history of life insurance risk appraisal.
Their comparatively low cost, high yield, ease of use and potential insurability impact explain why reports of pharmaceuticals prescribed for applicants are such a prized asset. Scoring paradigms have further embellished the value of Rx records, especially in simplified underwriting.
One of the most frustrating issues in clinical medicine is the propensity of a sizeable portion of patients to eventually stop taking medication as prescribed.
This is most common in symptom-free conditions such as high blood pressure and elevated cholesterol. After as little as 12 months, up to half of patients using statin cholesterol-lowering drugs no longer meet the criteria for adherence.
The capacity to rapidly and accurately ascertain whether an applicant takes medication as prescribed is one of the major payoffs from Rx records.
The Interstate Insurance Product Regulation Compact, now adopted by 44 states, sets uniform standards for the wording of life insurance applications. When insurers ask applicants about having medical tests done within some interval prior to applying for coverage, the Compact mandates that we limit this question solely to clinical testing ordered by doctors or other healthcare providers.
This unfortunate caveat means that applicants are not obliged to disclose DTC testing even if the results are mate-rial to insurability. As long as they do not tell their physicians about such tests prior to applying for insurance, we will not know they were done.
The bottom line is that we are confronted with the great-est potential for antiselection in the history of our industry at a time when an unprecedented portion of life insurance is being approved on a simplifi ed or accelerated underwriting basis. Outsourcing
There is a shortage of well-trained and highly skilled life underwriters. This situation will become more onerous because a sizeable number of veteran underwriters are expected to retire in the near-term future.
Hiring, training and, above all, retaining underwriters is a formidable challenge. Moreover, most job-seeking under-writers insist on working from home, further complicating matters for many smaller carriers.
Until recently, the outsourcing of life insurance case underwriting was primarily done during peak world fl ow intervals, not on a steady volume basis throughout the year. This is starting to change. So much so in fact that outsourced underwriting could become a major service provider business domain in the near future.
There has been a steady increase in the outsourcing of medical record summarization. Providers may have this work done domestically or by physicians in India.
These summaries theoretically give underwriters all essential APS, sparing them the need to read the records and thereby increasing their productivity.
The pace of change in life underwriting will continue to accelerate in 2017 and thereafter. We need to continue thinking outside the box to order to meet the needs of our industry. v
About the Author: Hank George, FALU, FLMI, CLU, has 45 years of underwrit-ing experience and is self-employed as an underwriting educator and consultant. He may be reached at 414-423-0967 or at www. hankgeorgeinc.com
Studies have documented mark-edly higher mortality as a direct result of habitual nonadherence. Therefore, failure to take medica-tion as prescribed should be factored into the risk assessment process. This is especially important when we grant preferred status to applicants with hypertension and hypercholes-terolemia based primarily on the
presumption that they are being adequately treated. Marijuana Consumption
Until recently, insurers lumped together marijuana and tobacco users in terms of insurability status.
In the last several years, a few prominent companies changed their practices. Adult recreational cannabis consumers who did not also use tobacco/nicotine became eligible for non-tobacco premium rates, in some cases even preferred risk status. In a recent survey, over half of chief life underwriter respon-dents said they had either made or were seriously contemplating this change.
There are several compelling reasons to distinguish between tobacco and marijuana use.
There is no credible evidence of excess mortality associ-ated with recreational marijuana use by adults who do not also indulge in tobacco. The absence of higher mortality was affi rmed in two studies and is further underscored by abundant research showing hardly any association between pot use and prevalent chronic diseases.
Furthermore, cannabis is already accepted as a medicinal agent in 24 states and the District of Columbia, with many other jurisdictions likely to follow.
It would be diffi cult to explain to insurance applicants why taking a legal therapeutic agent for glaucoma and fi bromyalgia means that they must pay the same premiums as those who smoke cigarettes!
DTC Testing and Antiselection
Direct-to-consumer (DTC) testing is now readily available. This includes nearly every test routinely used by insurers, plus scanning for coronary artery calcium deposits and abdominal aneurysms as well as comprehensive genetic marker profi les. Home screening tests for nicotine and illicit drug by products in urine can the purchased inexpensively via the Internet. The same is true for products that mask the presence of these byproducts.
“
Hopefully these
and other potential
drawbacks will not
jeopardize the payoff
from EHRs.
”
COVER
STO-RY
www.loma.org 13
A majority of life insurance underwriters expect an increase in frequency and
se er t ndem s er t e ne t t e rs fi nds un
e sur e
OUTLOOK
for Epidemics,
PANDEMICS
Nearly three-fourths (70 percent) of life insurance underwriters expect the number and severity of epidemics and pandem-ics to increase over the next fi ve to 10 years, according to a recent survey by Munich Re US Life, one of the world’s leading reinsurers.
Among the over 100 underwriters surveyed, 46 percent believe infl uenza (bird fl u, swine fl u, etc.) is the potential pandemic disease that carries the most risk for the insured population, followed by a currently unknown disease (25 percent), Zika virus (14 percent), Ebola virus (8 percent), and SARS (7 percent).
Of the life insurance companies represented, a majority (73 percent) take into account geographically localized risks in their medical underwriting process. However, only one-quarter of the life insurance companies polled currently have guidelines in place that take Zika virus into consider-ation, despite recent outbreaks across parts of Central and South America.
Dr. Gina Guzman, vice president and chief medical director at Munich American Reassurance Company, commented, “As alarming as the outbreak in South and Central America may seem, Munich Re expects limited impact on life and health insurance.”
When asked how recent epidemics such as Ebola virus and Zika virus have affected consumer behavior regarding life insurance purchases, nearly two-thirds (64 percent) of respondents felt they have had no impact, while 34 percent believe there are now more consumers seeking coverage.
In addition, 56 percent of respondents believe that the occurrence of epidemics or pandemics will have no impact on the accessibility of life insurance. Despite the potential for an increase in the number and severity of epidemics and pandemics, an overwhelming majority (91 percent) of the underwriters surveyed suggest it will be easier for the average consumer to obtain insurance at affordable rates within the next fi ve to 10 years.
“We are seeing a real interest in increasing access to life insurance products. I think that future accessibility of life insurance will be governed by new technologies and processes that will make issuing policies a quicker and easier process,” said Bill Moore, vice president, underwriting and medical at the company.
Methodology
The survey was conducted on-site at the Association of Home Offi ce Underwriters (AHOU) 15th Annual Conference in Orlando, Florida from May 1-4, 2016, and is intended to represent the views of 102 underwriter attendees, primarily from life insurance companies, who participated in the in-person interviews.
Munich American Reassurance Company, (Munich Re US (Life) founded in 1959, is one of the largest reinsurers in the U.S. offering life and disability reinsurance to insurance com-panies throughout the United States. The company also writes group, credit and other reinsurance products. Headquartered in Atlanta, with an offi ce in Chicago, the company is licensed, accredited or authorized in all fi fty states; Washington, D.C.; Guam; and Puerto Rico.
COVER STORY
OTHER VIEWS
By the Resource Staff
In today’s high-tech world, consumers expect fast service from every company they do business with, including insur -ers. Here are examples of how some insurers are speeding up the underwriting and policy issue process.
Lincoln Financial Group recently introduced LincXpressSM,
a series of streamlined processes designed to make life insur -ance underwriting and new business transactions easier and more efficient for advisors and their clients. LincXpress features a telephone application (Tele-App) process, the opportunity for “lab-free” underwriting and expanded electronic policy delivery options.
“LincXpress represents Lincoln’s continuous focus on providing a superior customer experience, and the evolution of the underwriting and life insurance sales and purchase process,” says Heather Milligan, Senior Vice President, Underwriting & New Business, Lincoln Financial Group. “LincXpress is a leading edge capability combining tech -nology, data and underwriting best practices, to make the purchase of life insurance faster, less invasive and more convenient for clients.”
The LincXpress Tele-App process lets clients complete their life insurance application through a brief phone inter -view with a dedicated Lincoln team. The Tele-App inter-view is scheduled at a time of the client’s convenience and helps ensure application accuracy, expediting policy delivery. The Tele-App process is available at no cost to customers for all of Lincoln’s permanent life products and Lincoln Life Elements® Level Term.
“Life insurance is a critical part of long-term financial planning, and now the application process has been streamlined for both advisors and clients with LincXpress,” says Andrew Bucklee, senior vice president and head of Insurance Solutions Distribution, Lincoln Financial Distributors.
As part of the Tele-App process, underwriting labs can be waived for qualifying clients within established guidelines. For clients that meet the criteria, this can result in a faster and less-intrusive application process.
LincXpress also expands electronic policy delivery (eDelivery) to all Lincoln life insurance products applied for through the Tele-App process or traditional application. The eDelivery process offers faster policy delivery, quicker revisions on issued policies if needed, e-signature capabili -ties, and elimination of paperwork. eDelivered policies are sent via a secure online platform and can be viewed 24/7 on a PC or mobile device.
In addition, Lincoln Financial Group has expanded its term life insurance portfolio with the launch of Lincoln TermAccel® Level Term insurance, designed to help advisors
provide affordable protection for younger age clients and those in need of lower face amounts. Lincoln TermAccel offers the ease and efficiency of a fully-electronic transaction process from quote to policy issue as well as streamlined underwriting opportunities that enable policies to be issued in a fraction of the traditional time.
Lincoln TermAccel features a streamlined, no-cost tele -phone application (Tele-App) process that allows clients to submit a brief electronic questionnaire with basic information and then complete a simple phone interview at a time conve-nient for their schedules. The phone interview is completed by a dedicated Lincoln team member, helping to ensure applica-tion accuracy and cutting down on time spent on paperwork for advisors and clients.
Based on the information provided by clients during the Tele-App interview, clients may qualify to have underwriting labs waived, making the process less invasive. The underwriting experience is further streamlined with Lincoln TermAccel’s automated underwriting approach which enables applica-tions to be processed and verified faster, leading to a quicker underwriting decision.
Approved Lincoln TermAccel policies are delivered faster through a secure online platform that can be viewed 24/7 on a PC or mobile device. Electronic delivery includes e-signature capabilities, and eliminates administrative tasks and paperwork.
More on Faster Issue and Underwriting
Here are examples from several insurers
COVER
STO-RY
More on Faster Issue and Underwriting
Here are examples from several insurers
Canadian Example
Manulife Canada recently said it will underwrite term life insurance policies without the need to meet with a paramedical to gather blood, urine and other biometric data for policies up to $1 million for eligible applicants between the ages of 18 and 40 in most cases.
“Manulife is the first insurer in Canada to raise the limit to $1 million,” says Marianne Harrison, President and Chief Executive Officer, Manulife Canada. “We are focusing on making the life insurance application process faster and easier so Canadians can achieve the level of protection they need.”
The previous limit was $250,000 to apply without the requirement of fluids and had been the industry standard for close to 20 years. Manulife has developed analytic tools that can better process the data obtained from reviewing thou -sands of applications over generations as well as inputs from a growing number of public sources. This modernization of underwriting will reduce the turnaround time on applications to less than a week for eligible applicants from the industry standard of four weeks, the company said.
There are exceptions to the increased limit process based on diagnosed medical conditions, such as heart disease or diabetes. These applicants will be required to provide addi -tional information similar to current industry practices.
“Canadians are seeing a modernization of the insurance industry in Canada,” says Harrison. “Manulife recently became the first insurer in Canada to underwrite HIV positive Canadians and with the introduction of Vitality, Canadians are seeing how Manulife is making life insurance easier to access and more relevant to their lives.”
Entirely Online Process
In 2015, online life insurance agency Haven Life launched. Haven Life says it provides the only solution for buying medi -cally underwritten term life insurance entirely online.
“Our technology provides customers with an improved solution for buying quality term life insurance,” says Yaron Ben-Zvi, Co-Founder and Chief Executive Officer, Haven Life. Haven Life’s one-of-a-kind process enables consum -ers to apply for and, if approved, begin coverage on a fully medically underwritten term life insurance policy in about 20 minutes. Prior to Haven Life, which is backed by Mas -sachusetts Mutual Life Insurance Company (MassMutual), the process would typically take several weeks and could not be accomplished online.
Haven Life’s key features include:
A Policy Optimized for Online Purchasing – The Haven Term policy is designed to be applied for and approved in real time. The company has removed multiple riders and confusing payment options in order to provide a policy that can be purchased quickly, easily and entirely online. Receive a Decision and Start Coverage Immediately – Haven Term applicants receive an immediate decision on their application and coverage can begin in as little as 20 minutes. Users then have 90 days to complete a medical exam.
Plain Language Policy – Haven Term buyers benefit from a plain language policy that makes it easier to read and understand their coverage.
Life Insurance Calculator – Haven Life’s proprietary life insurance calculator lets visitors determine how much cov-erage is needed quickly and easily. It has fewer questions and is more straightforward than most online calculators. Competitive Price Comparisons – After determining how much coverage is needed, Haven Life offers price com -parisons between Haven Term, issued by MassMutual, and policies from other top-rated insurers. If the shopper chooses to go with another provider, he or she is directed to the insurer’s traditional application process. This struc -ture gives Haven Life customers complete transparency on price and control over choosing which policy is best for their situation.
Customer Service – Intelligent technology doesn’t mean a lack of helpful customer service. Help during the application process is available during business hours via phone and live chat.
Where Do We Go from Here?
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I was taught that life insurance is a piece of paper and a promise. In times of adversity it can care for your family, pay the mortgage and send your children to college. That principle hasn’t changed, but the industry that guarantees that promise has evolved dramatically.
Good or bad, regulatory shifts have impacted the industry to the extent that how risk is assessed has been altered. The products offered have been further restricted. Regulations continually impose challenges and constraints on how we can sell our products. Consider ‘Too Big to Fail’, fiduciary obligations, and limitations on evidence types we can and cannot acquire and how we may or may not use them in assessing risk. Mortality does not discriminate and predict -ing mortality is fact-based science, not the manifestation of a preconceived outcome.
All that is occurring while we continually adjust to chal-lenges of an ever-changing marketplace. All carriers are trying to reach the millennial market. This cohort consists of the most highly educated citizenry in history. But when it comes to insurance, they are one of the least informed cadres ever. In a recent survey millennials estimated life insurance premiums at over six times higher than actuality.
That market also faces challenges like later occurring life events: marriages, home ownership, children, and postponed retirement planning. Education costs have left them burdened with debt, limiting discretionary income.
Reaching that market requires concentration on education about the essential need for insurance and retirement planning and that those are not discretionary expenditures
Sales techniques for that market are vastly different than the prior generation. Millennials demand instant gratification when making purchases. They have different buying habits, are tech savvy, and demand personalization and mobility. They require buying at anytime, anywhere, anyway.
Consider targeting ’experience affinity’ groups with products that meet specific needs of that group. When members of an experience group have a good purchase engagement, they become a stealth marketing organization. Peers respect recommendations from peers.
Simple facts;
Experience groups are small in size but have an enormous spectrum
Brand awareness is no longer the key differentiator. Experience groups congregate to the best price, product and service regardless of brand.
Carrier technology and underwriting must adapt. As the internet changed buying patterns, automated underwriting became a critical tool to match new buying habits. ‘Fast Data’ such as MIB, MVR, and prescription histories dramatically changed new business timelines. EHRs are beginning to show additional risk assessment progress. Credit/mortality scoring is becoming more accepted by the industry.
With these evidence types carriers should revisit the number and types of questions on applications. Fewer questions are considered less intrusive by a marketplace ever more concerned about their personal privacy. Review and eliminate questions where answers can be discovered through evidence sources. This is a call to action; observe the market, and orient your plan to your goals, decide to move forward with the plan, and then act. No more ‘where do we go from here?’
COVER
STO-RY
By Jerry Whetnall
Vice President, Product Strategy StoneRiver, Inc.
COVER
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OTHER VIEWS
By Sean Conrad, Hannover Re
In today’s digital world, consumers expect speed and convenience in the purchasing process. They look for most transactions to happen in “real time”—and life insurance is no exception. Producers, too, are looking for processing speed, particularly since life carriers have increasingly turned their marketing focus on the largely untapped middle market, where policy sizes are smaller and meeting customer expectations for convenience and price is key.
Despite these demands, from a risk assessment perspec -tive, nothing has changed for life insurers: The need to assess applicants to determine insurability is still paramount. Many life insurers who are looking to stay ahead of the curve have already adopted accelerated underwriting.
One Key to Accelerated Underwriting: Predictive Modeling Accelerated underwriting enables insurers to quickly identify “good risks” and put them through a less invasive underwriting process. With accelerated underwriting, no paramedical exam or fluids are necessary for certain lower-risk applicants.
Predictive modeling, a valuable tool in accelerated under -writing, is a targeted area of focus for Hannover Re—because our goal is to help insurers find innovative solutions that can help them grow their business and stay competitive. Predic -tive modeling enables insurers to underwrite in a non-invasive manner and issue certain policies in minutes, versus days, weeks or months.
Because we believe predictive modeling plays a key role in accelerated underwriting—and can provide significant benefit in the life insurance risk selection process—we have collaborated with LexisNexis® Risk Solutions. LexisNexis has
developed an effective predictive model called LexisNexis®
Risk Classifier.
How LexisNexis Risk Classifier Works
Using non-medical information to estimate relative mortality risk, LexisNexis Risk Classifier enables insurers to:
help drive better cycle times at lower costs, and complement non-invasive medical information
gain insight into a different dimension of mortality risk (focusing on lifestyle, behavioral and non-medical factors).
LexisNexis Risk Classifier uses FCRA data to estimate relative mortality risk, and produces a score based on the individual’s risk profile. Insurers can customize the use of LexisNexis Risk Classifier by setting score thresholds. They can also customize how LexisNexis Risk Classifier is used in the underwriting process. Hannover Re independently validated LexisNexis Risk Classifier and affirmed its predictive value. Life insurers can leverage Hannover Re’s insight and expertise on how to successfully integrate LexisNexis Risk Classifier in their underwriting process.
It’s a Win/Win
Many insurers who are already using LexisNexis Risk Classifier have benefited from streamlined underwriting and enhanced customer and producer satisfaction. We have found that new and improved tools, like LexisNexis Risk Classifier, provide additional protective value that helps to offset some of the impact of streamlined underwriting. Because LexisNexis Risk Classifier captures a different dimension of risk, it complements other real-time accelerated underwriting requirements, such as MIB and Rx (the pharmaceutical database), which tend to focus on medical data and risk. LexisNexis Risk Classifier helps improve processing times which creates a better experi -ence for consumers and producers and allows consumers to get the valuable protection they need more quickly than ever.
