A survey conducted by industry research group LIMRA shows that two out of three life insurance companies in the U.S. and Canada have at least partially implemented automated underwriting, and another 32% are in the planning stages.
When insurers were asked why they were making the switch to automated underwriting, the top reasons were to save time and money: 100% the life insurers surveyed said reducing the time it takes to issue a policy was one of the goals in using automated underwriting while 92% cited cost reduction as a goal. Term and whole life insurance were the two products most likely to have some level of automated underwriting, although 30% of companies indicated that they are exploring ways to expand automated practices to their universal life products.
LIMRA found that almost all life insurers (95%) were relying on application data collected by the Medical Information Bureau (MIB) in their automated underwriting practices, and that about 60% of the companies surveyed were using prescription databases, lab results, and motor vehicle records to inform their decision to issue policies. LIMRA notes that insurers couple this independent data with a questionnaire asking about the applicant’s health, family history and lifestyle habits. This kind of process has allowed 48% of insurers to reduce their need for an Attending Physician’s Statement (APS), which dramatically lowers the waiting period to issue a policy.
“Most consumers are used to the ease and convenience of buying goods online and our research shows they feel that purchasing a life insurance policy should be a similar experience. More than two thirds of life insurers in our study are using automated underwriting to meet today’s consumers’ expectations,” comments Mary Art, research director at LIMRA Distribution and Technology Research.
Art says that the next step will be to include predictive analytics in the underwriting process. “Some companies have begun using these tools and others are in the planning stages to implement them,” she explains. “The goal is to offer preferred-eligible products to suitable consumers without requiring medical underwriting. Ultimately, life insurers are working to make the process simpler and quicker for both the company and the consumer.”