Last updated: Data, tech, and AI: Changing the future of insurance underwriting

Data, tech, and AI: Changing the future of insurance underwriting


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For years, insurance underwriting has involved a lot of manual data gathering, assessments, and guesswork. The model has helped reduce policy risks and increase accuracy, but ultimately doesn’t give insurers a complete picture.

The future of insurance underwriting looks very different, with digital technology playing a starring role.

By using data analytics, AI, and other advanced technologies, insurers will be able to streamline processes, personalize products, and provide an overall better customer experience.

The future of insurance underwriting

With customer demands growing, the insurance industry is under tremendous pressure to transform. Customers today expect products and services tailored to them, and experiences like they have elsewhere in life and online. They expect speed and convenience — things the industry hasn’t exactly been known for.

According to our 2020 Customer Compass survey, 20% of customers said a lack of personalization in their policies was the main reason they switched insurers. Insurers and their underwriting teams must respond to these changes.

Fortunately, the explosion of data —  from electronic health records and credit scores to social media posts, IoT, and wearable tech — offers insurers a way to meet these new customer needs. By applying this data to underwriting, they can streamline data collection, offer dynamic pricing, and ramp up personalization.

A couple trends are transforming the industry by harnessing data: Continuous underwriting and accelerated underwriting.

These approaches will reshape the landscape to speed risk profiling, reduce costs, provide consistency, and boost CX.

Continuous underwriting: Mining data to power a new approach

The volume of data available to life insurers will continue to explode, providing insurers with a treasure trove of data to gain a better understanding of individual customers.

Increasingly, insurers are applying the insight mined from this data to switch up the traditional underwriting process. Instead of term-based updates and guesswork, continuous underwriting enables life insurers to assess risk throughout the life of the policy and make adjustments as needed.

Applying advanced analytics to massive data sets before, during and even after a policy is underwritten, improves risk assessment and produces overall better outcomes for insurers and insureds alike.

Insurers can shift from low-touch CX to always-on customer engagement. For example, they can dynamically re-price a product based on customer life events and reward customers who exercise or otherwise improve their health.

This new approach will benefit the future of insurance underwriting in a number of ways:
  1. Reduced risk – Data surfaces risk factors as they appear and gives insurers a more consistent way of evaluating risk across all applicants
  2. Lower costs – The data-rich environment replaces high-cost sources of data such as blood samples and paramedical exams
  3. Policy personalization – A complete customer view enables more precise pricing and tailored offers, increasing customer value
  4. Generational appeal – A tech-based approach helps insurers attract younger Millennial and Gen Z customers.

Fast forward: Accelerated underwriting

For customers, the process of applying for life insurance can seem agonizingly long and complicated. Accelerated underwriting speeds the process by using automation, data, rules, models, and pathing.

The approach incorporates many types of data, including those from traditional sources like Rx databases and MIB as well as from newer sources like medical data from wearables and social media. Applying AI, predictive analytics, reflexive health questions and other technologies to this data enables insurers to predict risk faster and better.

Gone are the days of manually reviewing every applicant. Instead, insurers can “path” applicants based on data. Low-risk, applicants get instantly approved for special pricing structures; no paramedical exam required. Predictive models automatically flag higher-risk applicants for manual review.

In addition to faster decisions, accelerated underwriting will boost sales with an easier, less-invasive application process and better prices.

Improved loss ratios and better consistency are other potential benefits.

Underwriting innovation is the future

Life insurers that want to transform their underwriting processes by taking these new data-driven approaches will need to make the right technology choices.

Legacy core systems can make it hard for insurers to incorporate data insights into their products. To capitalize on insight gleaned from raw data, forward-thinking providers are implementing cloud-native, API-enabled policy administration systems.

By taking a data-driven approach and leveraging an advanced platform, insurers can deliver consistent, personalized underwriting that fuels future growth.

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