Few would argue that the last three years have 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."
