State regulators eye life accelerated underwriting programs

A team at the NAIC is looking at how well these programs predict mortality rates

Mary Bahna-Nolan, an actuary, told regulators the goal of AUW programs is to reduce the time from application to issue. (Photo: Thinkstock) Mary Bahna-Nolan, an actuary, told regulators the goal of AUW programs is to reduce the time from application to issue. (Photo: Thinkstock)

An arm of the National Association of Insurance Commissioners is starting to talk about use of accelerated underwriting in the U.S. life insurance sales process.

Atate insurance regulators on the panel, the NAIC's Life Insurance Actuarial Task Force, are asking for more information about how well AUW systems predict when people will die.

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Birny Birnbaum, executive director of the Austin, Texas-based Center for Economic Justice, is asking whether consumers can challenge the data used in AUW programs, and whether consumers can challenge AUW data sources that might be incomplete, inaccurate, or biased against members of certain demographic groups.

Mary Bahna-Nolan, an actuary, gave the task force a presentation on AUW programs in December, at an NAIC meeting in Miami Beach, Florida.

A life insurer with an AUW program builds connections to many different consumer information databases into a life application system, so that underwriters quickly get information about the insurance policies a life applicant already owns, the kinds of prescription drugs the applicant has been taking, and several other factors that might correlate with low or high mortality risk.

Insurers and reinsurers developed AUW programs in an effort to improve on simplified issue life programs. In the past, those programs often combined brief applicant questionnaires with efforts to check an applicant's name against one or two consumer information databases.

Both AUW and simplified issue programs reduce or eliminate the need for applicants to go through paramedical exams.

Bahna-Nolan told the Life Actuarial Task Force members that an AUW program improves on the traditional underwriting process, "by using a less invasive underwriting approach and reducing the time from application to issue," according to a copy of the meeting minutes posted on the task force section of the NAIC website.

She described the differences between simplified issue and AUW programs, but noted that simplified issue programs are also using more data sources.

Bahna-Nolan, a Scor Global Life executive, appeared at the meeting on behalf of the Washington-based American Academy of Actuaries and the Schaumburg, Illinois-based Society of Actuaries.

Birnbaum, a former Texas Department of Insurance economist, said AUW programs should avoid relying too heavily on consumer information databases.

The databases may give pictures based solely on statistical correlations, rather than on one factor in a database actually increasing or decreasing mortality risk, Birnbaum said, according to the meeting minutes.

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