Life insurers’ new, automated underwriting processes could make customers happier, speed up sales and cut costs — but one risk is that cyber crooks could come after the underwriting data streams.
Kripa Thapa and other analysts at Moody’s Investors Service talk about the rating implications of automated underwriting processes in a new U.S. life insurance sector commentary.
About 40% of the world’s life and health insurers are now using “predictive analytics” systems, or statistical forecasting systems, in the underwriting process, up from 14% in 2013, according to Reinsurance Group of America Inc. survey data cited in the Moody’s commentary.
Moody’s and other rating agencies give ratings, or grades, that provide a rough indication of how likely a large borrower is to be able to pay off its debts, and how likely an insurer is to be able to meet its life insurance policy and annuity obligations.
The new robo underwriting commentary is a general look at the risks and rewards of increased use of automated underwriting, not an official rating document.
The Possible Rewards
The Moody’s analysts say the new underwriting systems should be good for life insurers’ credit ratings.
Consumers want quicker, simpler transactions, and automated underwriting systems should help, the analysts write.
“Being able to successfully integrate such technology will give insurers a competitive advantage over their peers and improve brand recognition,” the analysts say. “Underwriters will be able to focus on strategy, portfolio analysis and more complex cases instead of a large volume of standard cases.”
If the new underwriting systems make the life insurance sales process more efficient, that could help life insurers sell more different types of products to the same customer, the analysts write.
The Moody’s analysts assert that it’s too early to know whether automated underwriting strategies will produce different results from what traditional strategies produce.