At the 2014 NAILBA 33 conference in Hollywood, Florida, Brad Gabel (AIG Global Consumer Insurance), Bill Moore (Swiss Re), and Kathy Deren (Nationwide) joined forces to create the Risk Appraisal Forum, where they discussed the forecast of the underwriting industry as we enter year 2015.
Each panelist had a unique perspective on the direction the industry is taking and what changes they’ve seen and can predict to see in the near future. Here is a recap of their question and answer session.
How are things evolving in the industry, and can we adapt along with them?
GABEL: There’s a need for speed to get our products on the market — the whole idea of doing more underwriting on the spot. One of the things driving that is the low interest rate environment. A driving change in our industry is also innovation. We’re using the same tools but with minor evolutions.
MOORE: In underwriting, there is an explosion of data analytics. We study behavioral analytics. It’s amazing to see things like applications of authorization where you have to tell the truth. With certain phrasing, the truthfulness goes up exponentially. If you change “Do you smoke?” to “Tell us about your smoking habits,” the response rate indicating tobacco usage is much higher. There are ways to change things. And we’re an industry sometimes where we find something knew and we grab it like a dog to a bone, and I’m here to tell you that I’m not sure if data analytics will be the next big solution.
DEREN: We participated nationwide in a market metric survey. What was the number one request from producers? For carriers to develop more efficient underwriting and new business processes.
Predictive modeling is a hot topic, trying to get cases through quickly and efficiently. Underwriting is both a science and an art. For the art of underwriting, underwriters are looking at the picture holistically. We just have to be careful that we don’t take the art out of predictive modeling.
Also, people are living much longer, and there is a stat out there that 70 percent of all Americans will need some type of long-term care when they’re over age 65.
Most of us are very well-trained on life insurance underwriting, but going into 2015, we have to educate and train on mortality (life insurance) underwriting and morbidity (long-term care) underwriting.
Can you comment on the current relationship between direct writers and reinsurers?
MOORE: Relationships are as good as I’ve ever seen them. Reinsurers are conservative and what not; a lot of direct writers underwrite from manual given to them by reinsurers. As a reinsurer, when we look at cases, we reference our guide.
GABEL: Insurers are very supportive. I don’t think there’s a fear with reinsurance; you just need to manage the timing of when they’re getting involved and see all the information.
DEREN: I have become very passionate about reinsurance. Our experienced underwriters have relationships with the reinsurance underwriters, so much so that it’s still the days of old where they pick up the phone, define the case, and send us the papers later. Underwriters want to be advocates for you. Let us negotiate the cases for you with reinsurance.
Do you see a time where we will be able to go to a client and get their name, Social Security number, and all additional information will already be accessible?
GABEL: That is a question we get all the time, but I don’t see that happening yet. The environment seems to be continuing to drive things in a direction of “You cannot look at this; there is no access.” Take the thousand-dollar genome. Consumers can get their genetic profile and know the likelihood of developing a genetic disease, and yet we can’t know this. We need to find a way to continue to have access to that information. But that day when you have access to everything right on the spot, I think it’s more science fiction than fact.
What conditions in the past 5 or 10 years did you handle aggressively where you now take a step back and act more conservatively?
DEREN: There is more technology available in the medical world now – pulmonary nodules, for example. That’s always been a pain point. Because of CT scans of the chest, now we’re seeing these nodules. And if we following the Fleischner guidelines, we have to ask, “Will this develop into lung cancer? What are the risk factors?” That is one thing we’ve been underwriting more conservatively.
MOORE: We were more diligent with elderly premium financing.
GABEL: As a financial underwriter, we have a lot more tools today than we had even five or six years ago. All the database checks out there available to leverage – we get all that information, and most of the time it’s going to match and be a direct confirmation of what the client provided to you. But sometimes it doesn’t match; there may be a substantial disconnect where we may reduce the offer or say, “This is not something we’re interested in because we cannot get comfortable with the aspects of the case.” Financial underwriting is much more sophisticated.