Life insurance is undergoing a renaissance of sorts. The industry is slowly transforming from one entrenched in the old-age archaism of paper and manual processes to one embracing digital technology and artificial intelligence, which benefits consumers via a more enjoyable sales experience and better product pricing.
Now, rather than wait months to get a life insurance policy, some companies can issue fully underwritten policies — that is, those taking full medical history into account — within one to two weeks. A handful of more cutting-edge companies can issue them on the spot.
As a result, some financial advisers working with clients to purchase life insurance not only find the overall process easier and speedier, but also more profitable.
"They're finally getting out of the Fred Flintstone age," Thomas J. Henske, partner at Lenox Advisors Inc., said. "This is definitely not an Amazon experience yet. But it's going to get there."
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Through underwriting, insurers use a buyer's personal information, such as medical history, to help determine mortality, which they use to appropriately price their products.
The typical underwriting process, though, has been lengthy — upwards of three months, depending on the situation, said Samantha Chow, senior life insurance and annuity analyst at Aite Group.
Companies have, within the last few years, digitized the application process and cut down on the number of questions they've had to ask consumers (which in turn leads to fewer follow-up questions). Insurers are now able to gather some consumer data, such as prescription, credit and motor-vehicle information, from third-party sources.
"The need to automate some of this stuff has become apparent," Ms. Chow said. "Now we have all these tools available to help automate the process a little bit more."
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The use of computers — via statistical algorithms and rules engines — to discern risks have also driven further efficiencies.
Massachusetts Mutual Life Insurance Co., for example, debuted algorithmic underwriting of its policies in August. The company's head of new business and underwriting, Jennifer Richards, says it has shaved off roughly 10-15% in overall turnaround time for customers and allows for more competitive product pricing.
For Mr. Henske of Lenox Advisors, automated processes allow his clients to get a policy within one to two weeks, which he said is a significant reduction.
"The less hands that touch the file, the quicker it is for the client, and the more profitable we can be because we don't have to hire people to do mundane jobs," Mr. Henske said.
Algorithmic underwriting still requires consumers to get a medical examination, one of the more intrusive and time-intensive parts of the application process. Insurers require these exams to analyze things like blood pressure, weight, and urine and blood samples for health issues.
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Medical exams, though, are quickly becoming a thing of the past, at least for some consumers, due to "accelerated underwriting," a cutting-edge concept embraced by only a small number of insurers at this point.
This type of underwriting still passes specific individual data through rules and algorithms, but allows certain consumers deemed low-risk to immediately qualify for a fully-underwritten policy without a medical exam. Those who don't immediately qualify still undergo the normal medical underwriting for the product.
Importantly, consumers who immediately qualify receive policies that are individually priced, as opposed to receiving something that's standard-issue, which benefits consumers via lower pricing, Ms. Chow said.
Haven Life, a subsidiary of
MassMutual, and Protective Life Insurance Co. are examples of insurers that have adopted accelerated underwriting for term life insurance policies.
MassMutual is planning to debut accelerated underwriting for term and whole life products later this year, Ms. Richards said.
"Accelerated underwriting is what is new. There are only a handful truly doing it," Ms. Chow said.
Advisers looking to get large policies for clients likely won't be able to do so via an accelerated underwriting process, at least in the near future. Haven Life and Protective, for example, offer their instant products at a maximum $1 million face value.
"No one's going to get a $5 million policy without getting a medical exam," Ms. Chow said.
