An Underwriting Revolution Is Here

The basic underwriting model has served life insurers (and other types of insurers) well in traditional markets. But today’s rapidly evolving markets demand a competitive price that will turn a prospective customer into an actual one in minutes – while still increasing the insurer’s profit margin and reducing risk, based on the applicant’s probable health outcome.

The last major change in underwriting took place in the mid-1990s, when insurers desired more sophisticated underwriting processes, but found that their policy administration systems were largely unable to support them. This led to the birth of packaged underwriting solutions and automation, among other benefits.

Another underwriting revolution is here. The Internet of Things (IoT)/wearable technology, customer engagement platforms and social media, among other sources, offer insurers a veritable treasure chest of health-related data that is tracked and updated constantly. Leading insurers are beginning to use continuous underwriting and it is anticipated that this trend will grow.

What Exactly is Continuous Underwriting?

“Continuous underwriting” describes the process of collecting all potential information about a prospective insured and then quickly analyzing that information to provide insight on both positive and negative trends before issuing a policy. Post-issue, continuous underwriting supplies the insurer with information as the insured ages, enabling rewards and discounts to encourage healthy behaviors. Rewards for healthy behavior have been shown to improve an insured’s lifestyle.

Insurers who were once basically limited to a snapshot of insureds can use continuous underwriting to make quick and more sophisticated decisions when issuing the policy, measure and track what happens during the life of the policy and adjust accordingly. Continuous underwriting will improve risk analysis by exposing patterns, based on the wide array of information that is now available via evolving technology, including nightly sleep patterns, exercise duration and intensity (daily number of steps, etc.), and eating habits. Home security systems and driving habits can also be factored into the overall picture. All of this data can be used to re-price a product, or develop new, targeted products. These measures can reasonably be expected to increase profitability and reduce risk.

Today’s powerful data streams emanating from the wealth of available information can also be harnessed by insurers to position themselves and their brand as innovative and customer-centric.

Stay tuned for my new white paper, “Continuous Underwriting is Underutilized in the Life Insurance Industry,” which will detail the factors fueling continuous underwriting, lay out the business benefits and explain the essentials for continuous underwriting success.

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Erica Moe

Erica Moe is the head of Sapiens' North American Life Insurance practice. She possesses expertise in business and technology-enabled transformations, mergers and acquisitions, outsourcing, software implementations, business architecture and end-to-end operations for the financial services industry (life insurance, P&C, group benefits and banking).

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