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7 New Peeks Inside Life Insurers' Underwriting Machinery

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A team at the Society of Actuaries has posted a major report on how new life insurance policies really are made.

Members of the Improving the New Business Process Survey Subcommittee, part of the SOA’s Committee on Insurance Mortality & Underwriting Surveys, persuaded 19 U.S. life insurers and five Canadian life insurers to tell the subcommittee how they bring in new business.

The participating insurers include carriers of all types and sizes, ranging from Erie Family Life to Unum Group’s Colonial Life & Accident unit.

The participating insurers answered questions about their applications, underwriting requirements, underwriting resources and policy delivery processes.

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A copy of the full survey report is available here.

The results do not necessarily give a complete picture of what’s really happening in U.S. and Canadian new business processing. The list of major carriers missing includes Brighthouse, MassMutual, New York Life, Northwestern Mutual, Prudential Financial.

But the results may give readers the start of an idea about how new business processing is working.

For a look at seven highlights, read on.

Process (Image: Thinkstock)

(Image: Thinkstock)

1. How long insurers take to approve cases varies widely.

Six of the 22 insurers who answered a question about turnaround times said the process fewer than 70% of applications within 30 days.

Eleven said they process more than 80% of applications within 30 days.

2. The top underwriting acceleration strategy is low-tech. 

Twenty-three carriers listed and ranked the changes they made that had the most impact on speeding up underwriting. The survey managers ended up with a total of 60 underwriting acceleration changes.

The most popular underwriting acceleration change was adjusting age and amount requirements. That strategy came up 12 times.

Adjusting the underwriting rules engine ranked second; that strategy came up nine times.

3. The limits on use of automatic policy approval systems vary widely from insurer to insurer.

The SOA team found, for example, that 14 insurers reported the maximum face amount their systems could approve automatically for a 35-year-old.

Those insurers reported 12 different automatic underwriting maximums.

Three insurers set the limit at $500,000.

The other 11 insurers set their limits at levels ranging from $99,000 to $2 million.

For 75-year-olds, the automatic underwriting limits ranged from $24,999 to $500,000.

4. The underwriters’ work-life balance might vary widely.

Six of the participating carriers let all of their underwriters work from home at least some of the time.

Thirteen let some underwriters work from home.

Five never let underwriters work from home.

5. Electrocardiograms are less popular than they used to be.

Eleven insurers said they are using the heart assessment procedures about as often as they used to, but 13 said they are decreasing use of electrocardiograms.

6. The NT-proBNP heart failure test is more popular.

Three insurers have started using results from that test in the past two years, and 10 insurers have increased their use of that test.

7. The biggest driver of electronic application flow at the participating insurers is not web-based sales systems. 

Twenty-one insurers gave the SOA team e-App origination data.

One insurer, for example, said more than 80% of its e-Apps came in through the worksite marketing channel. No other participating insurer reported getting any e-Apps from the worksite marketing channel.

Just two insurers said they’re getting e-Apps from online sales systems. One of those carriers is getting fewer than 20% of its e-Apps from online systems, and one is getting somewhere from 21% to 40% of its e-Apps via online systems.

Insurers’ biggest e-App originators are their most traditional distribution partners: career agents. 

Ten insurers said they are getting at least some e-Apps from career agents, and seven said more than 80% of their e-Apps come from career agents.

—Read Two Online Life Distributors Expand on ThinkAdvisor.

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