Half of life insurers have some type of automated underwriting solution in place and 41 percent of companies are in the planning process, according to LIMRA research. By investing in automated underwriting solutions, insurers seek to reduce the time it takes to issue a policy. Almost three quarters of companies who have implemented automated underwriting report they have met this goal.
Reducing policy issue costs and achieving scalability were the other two most mentioned goals of automated underwriting. At least half of companies (59 percent and 50 percent respectively) have met those goals as well.
While the benefits of automated underwriting are being realized, there are some challenges for life insurers trying to implement these programs. The three most common challenges for insurers include, having adequate human resources, working with legacy systems, and the continual need to update the algorithms.
Automated underwriting is possible because companies are able to gather enough information about the applicant through other data sources. LIMRA research finds almost all insurers (94 percent) use data from medical information bureau (MIB). Seven in 10 insurers access prescription drug databases and motor vehicle records. While only two percent of companies are using electronic medical records (EHRs), 39 percent say they plan to start using them – the highest increase planned reported. (see chart)
As new technologies and data tools and data sources become available, automated solutions will continue to evolve and expand. Consumers will likely to continue to expect life insurance policies to be issued faster and as consumer demand increases so will pressure from financial professionals. Insurers that have started to automate their underwriting solutions will have a competitive edge over companies who have yet to venture into this area.
LIMRA members Interested in learning more about automated underwriting, may read, Transforming Underwriting: Automated Underwriting Company Practices for Life Insurance in 2017.