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3 Ways AI and Robotic Process Automation Will Improve Life Settlement Transactions

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The U.S. life insurance industry is beginning to understand the vast potential benefits of robotic process automation (RPA) and artificial intelligence (AI). These two related breakthrough technological innovations leverage the power of machine learning to increase productivity and reduce the risks associated with human error.

Of course, many professionals in our industry find the names of these technologies unappealing, prompting skepticism from the outset. These reactions are often rooted in fear of the unknown, apprehension that is unnecessary once we understand the essence of the technologies.

(Related: Jim Maxson to Lead Life Settlement Group)

RPA and AI are often used in tandem to complete a transaction and are currently utilized in many customer servicer interactions we encounter daily. As with many new technologies, the possibilities of RPA and AI are virtually limitless, while the restrictions are commonly rooted in poor execution. The best software and systems capabilities in the world do not overcome poorly executed or poorly designed processes.

Adoption in the Life Insurance Space

RPA is an emerging form of business process automation technology based on use of software “robots” that consistently apply certain algorithms. AI is simply a form of intelligence that is derived when a machine mimics cognitive functions associated with human minds — such as “learning” and “problem solving” — and continues to improve over time.

The race to incorporate RPA and AI into the way life insurance companies do business has already begun in earnest. With respect to RPA, more than 45% of life insurers say they are actively deploying RPA systems now and another 35% are in the pilot phase, according to the 2018 World Insurance Report. In regard to AI, a majority of life insurers (55%) said their firms were piloting or deploying AI solutions now.

More than 80% of insurers surveyed in the 2018 World Insurance Report said the top driver for embracing these digital technologies is “customer demand” — just 45% referred to margin pressures — so it is clear that life insurance companies view these technologies as crucial to delivering the level of service that today’s consumers demand. The insurance industry is typically slow to embrace change (for a multitude of reasons such as regulatory oversight of personal information), so these statistics are encouraging and demonstrate that insurers are partaking in the type of self-reflection necessary to stay relevant in an ever-increasing digital age.

RPA and AI are poised to fundamentally change the way life insurance is priced, sold and managed in the primary market. I believe the same will be true in the secondary market for life insurance policies.

RPA, AI and Life Settlements

Just as RPA and AI technologies are changing the way life insurance companies do business, they have the potential to change the way we do business in the life settlement industry as well. We have already embarked on an aggressive initiative to integrate RPA and AI into our daily operations and are learning its highest and best uses with each step of innovation.

Here are three ways that I believe these technologies will improve the purchase and servicing of life insurance policies in the secondary market:

  1. Greater accuracy in targeting individuals with a need or interest in a secondary transaction

Advanced filtering tools based upon AI and machine-based learning techniques can more accurately identify individuals and policies suitable for a secondary transaction.

This is increasingly important as the number of senior citizens who lapse policies remains staggeringly high, with perhaps as many as 96% of life insurance policies lapsed or surrendered, according to Conning & Co.’s 2016 Life Settlements, Secondary Annuities and Structured Settlements report.

By focusing on criteria that accurately filters the types of individuals and policies appropriate for a transaction, we can reduce the burden on the current call center and agent-driven approaches utilized by many in the marketplace today. This can drastically reduce the procurement costs for providers and investors in the space necessary to locate and transact a secondary life settlement transaction. The result will be overall industry growth by creating more successful and stress-free experiences for both the buyer and seller.

  1. Faster and more accurate pricing processes

The pricing of a life settlement transaction is a far more made-to-order process than the pricing associated with other assets such as real estate, securities and equites. AI and RPA processes will focus mainly on insurance carrier and policy information — as well as medical underwriting processes — to more efficiently and accurately calculate the net present value of a policy. The integration of these technologies with existing actuarial based pricing software is inevitable.

In a time when liquidity pressures continue to mount for much of our baby boomer population, this can fill a much-needed void and allow our seniors to benefit from a streamlined secondary transaction process and receive sale proceeds faster.

  1. Superior portfolio management and portfolio servicing

In the same way that these new technological advances will help optimize the secondary sales process, they will also help fund managers and portfolio servicing organizations optimize the continued management and administration of existing portfolios. By being able to more accurately target changes in medical condition and changes in insurance carrier behavior, fund managers will be able to differentiate themselves from the competition.

There are already massive aggregated tranches of policies that are bought and sold through larger financial institutions; more accurate and diligent policy servicing will enable life settlements to create greater value for investors and policy sellers alike.

The Opportunity

RPA and AI are exciting technologies that are often viewed with trepidation by members of professional services businesses. But there is no reason to fear “AI Takeover” in the life insurance industry and I think this is especially true in the secondary market of life settlements.

Our business is fueled by nuance and judgment of professionals when it comes to policy acquisition, servicing and disposition. The integration of new machine learning technologies will only serve to accentuate that human component of what we do in the secondary market. RPA and AI have the potential to improve our speed of operations when it comes to policy purchases and portfolio servicing, which will free-up individual professionals to engage more directly with insured individuals and policy owners.

Ultimately, these technological innovations will help us streamline our businesses and push us to higher levels of success in an increasingly automated future. The result will be both a more efficient and a more interactive life settlement industry.

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John McFarlandJohn McFarland is chief executive officer of NorthStar Life Services LLC, a full-service life settlement advisory firm that assists institutional and private investors with each stage of the life settlement investment cycle.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.