Change Has Finally Come to the Insurance Industry
Why It Matters:
- The industry is changing rapidly, creating a better customer and producer experience.
- Carriers have increased the risk they’re willing to accept on accelerated programs.
- As the quality and quantity of data increases, the invasiveness of the process is decreasing.
Throughout the insurance industry, nonmedical underwriting efforts have greatly increased over the past five years. Since COVID, there has been a marked increased interest in developing processes for customers that are significantly less invasive. I believe for higher face amounts it may be a while before anyone is completely comfortable relying solely on data sources alone. But several carriers have begun to redefine what level of risk they are willing to accept, applying just those data sources in the underwriting process. A few years ago, it was typical to see $1 million as the high end for an accelerated program. Now some carriers are at $2 million and even $3 million.
The amount and the quality of data have changed during this period, too. What you see today is more structured data that a carrier can easily use in a decision engine, thereby automating processes and driving toward a better customer experience. There is also an effort on the part of many vendors to provide services that will help producers quickly fill out applications by accessing available customer data to pre-fill parts of the application. Vendors have certainly become very aware of carrier needs and are actively looking for ways to create value for their customers. As a result, we all benefit by creating a better experience for the ultimate customer: the insured.
As data availability becomes more common and we develop clear ways to structure that data in a usable way, a carrier will be able to make faster, more accurate decisions that will benefit the customer, the producer, and the carrier itself. We still haven’t seen the full benefits of electronic medical records (EMRs), but they are likely to have a big impact on any number of the nonmed processes in place today. Medical records have long been considered our gold standard for underwriting. Once we have the ability to collect medical data, aggregate, organize, and eventually score it, everything changes. Right now, the cost for EMRs is much lower than a normal set of medical records. Combine that with reduced expenses from fewer additional requirements and process improvements, and carriers may get comfortable taking on more risk.
The industry has been changing at a pace that’s never been seen before. Underwriting remains a critical part of the process, but it may look different in the future. At Transamerica, we’re trying to create a process that puts our customers at the center of everything we do. We’re developing a process that makes the buying experience quicker, less invasive, and is highly focused on customer needs while also providing an accurate risk selection process. Building the right accelerated programs will benefit insureds, producers, and carriers alike by improving cycle times and increasing placement rates, as long as we can also maintain mortality assumptions.
Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker-dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as, medical, insurance, securities, tax, legal, or financial advice or guidance. Please consult your personal independent advisors for answers to your specific questions.
Things to Consider:
- Higher face amounts are coming but it may be a while until carriers are fully comfortable relying on data sources alone.
- Watch for EMRs to continue taking on a bigger role in underwriting.
- Underwriting and processes may be changing but the idea of keeping the customer at the center of everything we do remains paramount.
Neither Transamerica nor its agents or representatives may provide tax or legal advice. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal professionals regarding their particular situation and the concepts presented herein.
Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker-dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical or financial advice or guidance. Please consult your personal independent professionals for answers to your specific questions.