If you’ve been trying to get life insurance and been put off by the lengthy analog process, I don’t blame you. Removing barriers to coverage is why we’ve worked so hard to bring this important product into the 21st century with a fully digital platform.
One of the most exciting parts of this innovative journey was the underwriting. Underwriting is data-driven, and data—how we get it, how we analyze it, and how we use it—is evolving exponentially. With things moving so fast, it’s important to pause to acknowledge how far the industry has come and consider where it might be heading.
Underwriting, a concept that dates back many centuries, began to slowly develop in the 20th century, when additional health and risk classes were added in addition to the original age class. The smoker/non-smoker designation, introduced in the 1970s, along with advances in blood sampling in the 1980s, provided a more accurate assessment of risk. But underwriting administration still involved face-to-face meetings and handwritten documents, with a hefty price tag for labor and lab testing.
In short, it was viewed by many as an unloved process, and the application process was viewed by these people as a lengthy and painstaking job. Despite the consumer perspective on the underwriting process, it remained relatively unchanged throughout the 20th century, perhaps because there was no real incentive to change it.
One of the hallmarks of the 21st century is getting everything you want instantly and online, whether it’s banking or credit approval. Life insurance is now also available instantly and online.
But not all digital underwriting is the same. The launch of “easy dispense” products has resulted in a more desirable look, but it has come at a cost to the consumer—literally. Lower underwriting resolution comes with more risk, which means higher premiums.
Next generation digital underwriting uses digital data sources and complex rules to provide instant offers at a fully guaranteed price, eliminating the trade-off between convenience and price. This requires laying a significant foundation for product development as well as careful and thorough auditing to ensure consistent underwriting quality.
If we consider how revolutionary the introduction of smoking courses was in the 70s, we can appreciate how much new scientific research will affect underwriting in the coming years. Take, for example, recent attempts explore how sitting could be the new smoking. Now imagine these discoveries combined with the spread of medical technology data.
Wearable devices such as the Apple Watch and Fitbits are already widespread. Statistics such as steps and hours of sitting are now firmly embedded in our daily lives. The ability to collect, understand and use data responsibly holds great promise for the future. What if underwriting were more like a series of snapshots over time? How will this change the process in favor of the consumer?
By better understanding the insurer’s personal data, insurers will eventually be able to recommend reactive and preventive actions that can increase life expectancy, improve quality of life and health, and save the client money. This could mean that, when combined with medical advances, something like a digital insulin monitor could not only reduce the risk of diabetes, but also significantly lower the cost of insurance premiums. Underwriting, and therefore life insurance companies, may eventually become partners in longevity.
Whatever the future of underwriting is, it will depend on advances in technology and data, which is why it is so important for incumbents to accelerate their digital transformation and for insurance companies to maintain their digital edge. Traveling into the unknown has never been so exciting.