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been easy on life insurance companies as the financial crisis devastated their
balance sheet and the soft economy dampened demand for their products.
A new report from Boston-based Celent, “Trends in Life Insurance New
Business and Underwriting Systems Usage,” examines how insurers are reinvesting in technology to counter these economic headwinds and ready themselves for a more competitive marketplace.
The report, authored by Celent Senior Analyst Mike Fitzgerald and Analyst
Karen Monks, and based on a joint research survey conducted by Celent and
Insurance Networking News, says insurance companies are increasingly looking to
new business and underwriting solutions to achieve organic growth and cut
costs. “The recession caused many people to think of life insurance products
as discretionary and 2009 proved to be a difficult year for insurers,” the report
states. “Although some rebound in revenues has been achieved in 2010, the
prospect moving forward is lower levels of premium growth than previously
experienced.”
With external forces conspiring against new business, reducing cycle time
is one way insurers can spur growth internally. “The benefits of a more rapid,
more accurate process include increased capacity of existing staff and tools,
enhanced agent relationships, and improved customer service,” the report
states. “All of these can contribute to organic growth.”
So how do new underwriting systems trim cycle times? Monks tells INN
one of most immediate ways is by speeding the process of aggregating data.
“Data collection is tougher on the life side,” she says. “It actually involves a
physical examination.”
Monks says much of the slack in the life underwriting cycle revolves around
the attending physician statement (APS), which contains much of the medical
background information needed to underwrite a policy. Monks says modern
underwriting systems can pre-fill many fields in an underwriting form by
utilizing third-party data and thus get the process started well in advance of
receiving the APS. “The addition in the last couple years of the fact that you
can get pharmacy data as well and find out so much information in advance
of the APS is going to be a big time saver for insurers,” she says.
In addition to having the ability to link to third party data sources, new
purpose-built underwriting systems are making greater use of analytics,
Fitzgerald notes.
While use of analytics is sometimes viewed solely as way to automate underwriting, Fitzgerald notes it can be a great aid to underwriters, telling them
when to ask more questions and request additional information. The fact that
most of the rules in a modern underwriting system are configurable by business users is another change for the better, Monks adds.
Fitzgerald says many of these changes to underwriting systems were only
feasible in the last few years as carriers moved toward service-oriented architectures. “SOA has really allowed fit-for-purpose tools,” he says. “Before, new
business/underwriting had to be part of a policy administration system. Now,
with SOA you have the ability to componentize solutions and essentially plug
in whatever you need.” INN
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Reduce IT/
operation costs
Reduce
underwriting
costs
Increase
accuracy of
underwriting
Reduce
underwriting
time
Improve
profitability
Reduce
claims costs
Enter new
market channels
Minimize
invasiveness
of medical
requirements
(testing)
83%
75%
67%
67%
58%
17%
17%
