With a conservative blue suit, matching portfolio and newly minted diploma, I interviewed for my first job as a life insurance underwriter at some point during the Regan administration. Of course the internet hadn’t been invented yet, so it took a trip to the university library to get a little background on what an underwriter actually did for a living.
Fortunately, I fooled the recruiter and started my new job just two weeks after graduation. Settling into my first day of work, my desk was stocked with the then-tools of the trade: pens, paper and a rubber finger to prevent paper cuts while sifting through fat files full of customer medical and financial records. There was no PC—it was several years before one of those newfangled devices landed on my desk. Believe it or not, we kept track of our underwriting notes on paper. And, if I needed to communicate with an agent or request additional medical records, I wrote the message out longhand and the underwriting assistants would pick up the files and send the message.
“The combination of traditional underwriting with the insights from data and analytics offers the opportunity for a streamlined underwriting process”
Over the years, process evolution occurred slowly. Email became a common tool and underwriters finally had access to PCs so they could communicate directly with agents. Many companies adopted electronic and telephone applications to improve the quality of data and eliminate the need for redundant questioning. One of the most challenging adaptations for underwriters was moving from paper files to on line images; sifting through 75 pages of doctor’s scrawled notes on a computer screen led many seasoned underwriters to visit their optometrists. But all in all, the fundamental underwriting process really didn’t change much.
Fast forward to today. For the first time in my career, underwriting is now considered sexy.After years of competition based on price and product features, carriers are now looking to reverse the trend of flat sales by developing consumer-friendly applications and reducing invasive requirements, which will ultimately serve to decrease the average 30-day cycle time.
Led by insurers such as Axa, Aviva, and Principal Financial, many carriers have developed risk models to help them predict which customers are healthy enough to be underwritten without a blood draw or exam. These models–or algorithms–are fueled with traditional data sources, including motor vehicle and prescription records, plus “new-ish” sources such as public records providing insight into bankruptcies, and even social activities such as skydiving or other thrill-sports. Underwriters are partnering with data scientists (MassMutual has 40 of them) to build, develop and deploy these innovative underwriting approaches.
Some carriers—like my own company, MassMutual – are also following the lead set by their property and casualty brethren by using algorithms to determine the appropriate rate class. Underwriters and medical directors define automated rules to discern whether the customer has any significant risk factors—and then partner with the data scientists to build an algorithm to place the applicant into the most appropriate risk class. The combination of traditional underwriting with the insights from data and analytics offers the opportunity for a streamlined underwriting process and better mortality. A huge win for customers and the advisors who serve them.
What’s next in the Revolution?
The majority of medical providers has now adopted Electronic Medical Record systems. The ability to access these records—instantly and digitally—is the game-changer in my career. The time to obtain medical records will drop to minutes, rather than weeks. And the records will be digital instead of a cumbersome PDF. With this wealth of data, underwriters will reduce the number of medical questions on the insurance application. Blood profiles will be reserved for very large risks, or customers who are off the grid.
As algorithmic underwriting decisions shorten the application process considerably, it gives customers quicker and easier access to the peace-of-mind and financial protection life insurance provides. In other words, we’ll be able to reach more customers more quickly.
With thousands of agents leveraging these algorithms to deliver a faster and more tailored experience – and providing real world insights and feedback – the future of algorithmic underwriting remains exciting.
So, while this revolution may not change the world, it will have a big impact on underwriting and the insurance industry as a whole.