Seattle — In recent years, increasing attention has been paid to the role of lifestyle-based analytics (LBA) in health insurance underwriting, according to Seattle-based actuarial and consulting firm Milliman Inc. In some instances, proponents of LBA made overly optimistic claims about the use of consumer data as a predictor in the underwriting process. Milliman's Jonathan Shreve, author of the white paper “Lifestyle-based Analytics: A Practical Guide”, examined the appropriate and effective use of LBA as an advance in risk selection and classification.

Medical studies have shown that lifestyle characteristics and habits have a clear impact on disease prevalence. LBA uses information about lifestyle to enhance the risk classification system for relevant conditions. This information comes from data aggregators, which collect information from a variety of sources. Statistics, when properly interpreted, can enable underwriters to identify relationships between lifestyle information and prevalence of various diseases, which may result in a strong correlation with expected claims, Milliman reports. Hence, LBA can help differentiate high-cost and low-cost insurance plan members.

"For some of the correlations we have found, we believe there is a clear cause and effect—people who exercise more have fewer cardiovascular problems, and people who live alone have greater rates of depression," Shreve says. "Sometimes, the lifestyle data may reflect the condition, rather than the other way around."

LBA is increasingly viewed as a high-quality advance in the art of risk selection, according to Milliman. It does not pick out specific individuals in a group who definitely have a condition, thus limiting its application in individual and disease management applications. Nonetheless, LBA does identify meaningful differences from one person to another, and from one group to another, in the likelihood of experiencing or developing adverse conditions.

It now appears likely that LBA could be used in conjunction with other risk classification tools to produce underwriting results with a higher degree of accuracy.

Source: PR Newswire

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