Fully underwritten life insurance policies are competing more and more with simplified issue policies for the title of which product is the easiest and fastest to obtain. In an attempt to meet the needs of young consumers, traditional players are shortening their turnaround time thanks to the internet and artificial intelligence.
Insurers offering simplified issue products have stated for years that their products are easier and faster to obtain than partially and fully underwritten products. After a short series of questions, clients are accepted without further investigation. This is ideal for those difficult to insure who must, however, pay a higher price to obtain life insurance this way.
Traditional underwriters, though, are stepping up to the challenge. A growing number of insurers are eliminating urine and blood tests for higher and higher face amounts of insurance. In recent weeks, both iA Financial Group and Desjardins Insurance made announcements about their simplified underwriting approaches.
With the launch of its EVO platform in May, iA eased its medical requirements for clients aged 50 and under or with a life insurance policy face amount of $500,000 or below. These clients do not have to submit a blood profile, vital signs test result or urine analysis. In addition, EKG and stress EKGs, for life insurance as well as critical illness insurance, are no longer required for any age group. The platform contributes to accelerating and simplifying the process thanks to an automated rating engine and the use of electronic signatures.
During an exclusive interview with The Insurance and Investment Journal during its Annual General Meeting in May, iA's CEO Yvon Charest explained the initiatives that brought the company to launch EVO two weeks later. EVO is a platform that allows nearly half of clients to be instantly accepted at point of sale for all life, critical illness and disability products offered by iA, except for the simplified issue life insurance product Access Life, which will be integrated into EVO in the future.
This new system means that for almost half of its clients the average turnaround time will drop from “from 32 days to one second,” says Charest. The EVO platform offers a pricing process that is adapted to the health of the client.
Applicants who are eligible to be fast-tracked will mainly be those looking for a face amount of $500,000 or less, with above average health. “Two years from now, we expect the software to be advanced enough to accept up to 75 per cent of applicants instantly,” said Charest.
The software is based on many years of underwriting data. “We are the second biggest life insurance seller in Canada, in terms of the number of policies. That makes for a lot of applicants over the years.”
iA has also recently created the position of vice president and chief of data analytics. François Blais holds the position.
A significant trend in the industry is the acceleration of the ratings process, which is the result of a major change in mindset impacting all business sectors, says Yvon Charest. “The process is accelerating in many sectors, especially in group insurance, where claims processing is very fast. This has created pressure as people increasingly demand immediacy,” he explained.
EVO will be evolutionary, added Charest. “It will serve as a model for the use of artificial intelligence. All information in the system will be digitized and easy to access. It will allow us to know how the changes we make to our risk rating standards will affect our mortality experience.”
Desjardins Insurance also took a step towards simpler and faster underwriting in May. There will be fewer blood and urine analyses, and fewer EKGs.
Desjardins will do this without turning to analytics, Nathalie Tremblay, life and health products for the insurer, told The Insurance and Investment Journal. “We are focusing more on the medical questionnaire, rather than the test results.”
Urine and blood tests were eliminated for applicants 40 years old and under looking for a face amount of up to $500,000. Underwriting without medical tests also applies to clients ages 41 to 45 for insurance amounts up to $500,000. EKGs will no longer be required for life insurance applications for face amounts below $5 million.
For traditional products without exams, the underwriter will be able to ask for a report or an exam based on the answers to the application. Tremblay says, however, that Desjardins is often considered one of the least strict insurers.
Tremblay believes the trend towards simplified underwriting will grow because insurers want to adapt to a new generation of consumers. “We must think of younger generations who buy everything online and expect their order in 48 to 72 hours. To wait 32 days for insurance will not interest them,” she says.
A niche player active in the online simplified issue market since 2013 with Insurance Without Medical Exam (IWME), Humania Assurance transitioned from accelerated underwriting to simplified issue in Oct. 2016, with HuGO. Humania’s CEO, Stephane Rochon, believes the two products each have their place in the market. For example, people with HIV, those who have experienced heart attacks, or who have a history of driving under the influence, will continue to choose simplified issue products, he says.
The internet has also made the simplified issue process easier, says Rochon. “Simplified issue products were adapted to the internet faster, because they contain fewer medical questions. When we started with IWME, we took bigger risks than we would with a traditional product,” says Rochon. The price is however adjusted accordingly, for example twice as expensive as standard rates in certain serious cases.
The launch of HuGO in Oct. 2016 was a big step forward, says Rochon. It is part of a trend where insurers can accept applicants instantaneously, at a standard rate. “The real challenge for traditional products online is not to create an electronic application. That has existed for 20 years. The key is the algorithm making the decisions,” says Rochon.
For example, the HuGO platform is connected to an MIB medical information centre the moment the transaction takes place. “The more complicated part is to interpret that information, and to adapt the questionnaire instantly, and to modify client experience in real time,” he says.
The transaction can take 15 minutes for someone who does not have an MIB file or up to 45 minutes for someone who does have one. This difference is of little consequence, says Rochon.
“Reducing the turnaround from 38 days to one or two days changes the client’s and the advisor’s experience significantly,” he says. “If the managing general agency receives a 10-year term life insurance application there is a price to processing it with people, office space, etc. If HuGO processes applications instantly, the advisor’s firm will see a significant improvement in efficiency.”
From paper to digital
Foresters Financial transitioned to electronic applications all across Canada in 2015, with the exception of Quebec, due to technical details. It will soon be launched in Quebec, said the sales director, Aziz Rguigue, during an interview with The Insurance and Investment Journal on June 8. “After a pilot project in March that lasted many months, our online applications are in their final stage. We should launch our online application with electronic signature across Canada in a few weeks.”
Rguigue says that the insurer’s fully underwritten products do not offer instant acceptance. The simplified products are for clients who respond “no” to all (health related) questions. This is the case for the insurer’s simplified issue non par whole life products launched at the end of last year. These products allow for instant underwriting of $10,000 to $100,000 face amount: Non-Par Whole Life and Child Non-Par Whole Life.
He underlines that simplified does not mean the product is meant for people who are difficult to insure. “Simplified issue is a regular product for healthy people. It is not a guaranteed issue product. The issuance is simply faster. When someone is eligible, the policy is issued with the same coverage quality as a fully underwritten product. The person will pay a little more, however, because he does not have to go through the underwriting process,” says Rguigue.
Foresters also insures the risk of many products developed and distributed by Canada Protection Plan (CPP). Michael Aziz, senior vice president of sales, says he is convinced simplified issue is the future. “With simplified issue, you can skip electrocardiograms and urine or blood tests. If you get through a series of medical questions, it represents a standard risk, and it is highly likely that the policy will be issued by simplified issuance,” he says.
The higher pricing for simplified issue policies concerns some, says Aziz. But, the possibility for someone who already has had cancer to obtain $500,000 in coverage is a generous offer, he contends. “It might be about 150 per cent of a standard premium, but that depends on the segment the person belongs to, for example the age,” explains Aziz.
Simplified issue products have seen strong growth at CPP, he adds, because people do not always have time to go see their doctor. “Our advisors tell us that their clients are ready to pay more to get their coverage immediately: they are looking for something practical,” says Aziz.
After having made themselves a name with guaranteed issue products many years ago, CPP is no longer perceived as a last chance insurer and distributor, he adds. It is now perceived as the company with simple processing, Aziz says.