The number of career agents-the largest distribution channel for life insurance-dropped significantly in a decade, down from 238,000 in 1990 to 178,000 in 2000. In addition, by 2010, 13.2% of the U.S. population will be 65 or older.These demographics present life insurers with product, distribution and operational challenges as fewer agents are available to sell new-sometimes complex-products to consumers who are planning for their retirement years.

But these challenges can be alleviated, in part, by technology, according to TowerGroup Inc., Needham, Mass.

"One of the most important issues for insurers to consider is how technology can be a competitive weapon to serve the advisor and their customers," says Cynthia Saccocia, senior analyst in TowerGroup's insurance practice.

Whether an insurer maintains a career agency force or sells products through brokers, banks or wirehouses, automation in life insurance operations is a strategic imperative, she says.

The need for real time

Specifically, field support, application submission and underwriting are the most critical areas where life insurers should be implementing new technology, says Saccocia, in a recent report titled, "Life Insurance Distribution: Turn Up the Volume, Turn Down the Costs."

"In the area of field support, there's a definite need for real-time transactions-ranging from illustrations to new business processing," Saccocia says.

Independent or career agents tend to use bridging technologies for real-time transactions--such as AMS' TransactNow and IVANS' Transformation Station--while third-party distributors tend to use direct links to carrier sites, she says.

As for new business applications, "some brokers and agents will continue to work in a paper environment because that's what they're comfortable with and that's what they're accustomed to," says Saccocia.

However, carriers need to make it easier to submit applications--and, in many cases, automate the process--especially for third-party distributors who work in a transaction-oriented environment, she adds.

New business automation offers several benefits, according to the report:

  • Generating documentation on demand from a central data source and maintaining forms templates keep information current and easier to manage.
  • Gathering pertinent information that meets a carrier's specific requirements improves data quality and lowers costs and time spent on unnecessary requests for statements from attending physicians.
  • Establishing rules to gather data required for specific applicants, such as supplementary questionnaires and medical evidence, reduces administrative costs.
  • Offering on-demand illustrations and point-of-sale support improves the insurer-distributor relationship.

Similar to new business automation, automated underwriting is a key technology for improving life insurance distribution, according to the report.
Life insurers are beginning to use tele-underwriting to support distribution, according to Saccocia. This involves gathering information to qualify consumers for life insurance via the telephone or the Internet, as opposed to field agents gathering the data.

Automated underwriting

Also, up to 80% of new business applications may be eligible for automated approval without needing underwriter review. And, automating underwriting can reduce processing times from weeks or months to hours or days, she notes.

"Insurers should find ways to process a higher proportion of this business without intervention," she says.

"This is where we see the importance of the rules engine-and the ability to update and integrate data-so carriers can assess risk more quickly and effectively," Saccocia says. "With automated underwriting, carriers can save the underwriting reviews for the more complex cases where they're necessary."

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