Continuous underwriting offers a wealth of benefits to life insurers.
A report by Celent, a leading research and consulting firm, looked at continuous underwriting’s top value propositions. Insurer shareholders ranked first place in the survey, based on the rationale that continuous underwriting would lower rates, which should translate to a greater volume of sales. Next up was “tech-savvy perception,” which would likely help life insurers market to generations Y and Z and improve their brands. Third place was “fair pricing to insured,” which would presumably improve the customer experience and expand the provider’s customer base via attractive offers (more on pricing in a moment).
Unlike the not-so-good-old-days of underwriting, insurers today don’t have to wait to get scraps of information during the renewal or claims processes.
They can become aware of risk factors as they appear and try to work with the insured to minimize or eradicate them.
Better yet, they can attempt to prevent potential negative outcomes from occurring in the first place.
The Impact on Price and the Bottom Line
An interesting report by Capgemini, a consulting and outsourcing firm, outlines how continuous underwriting can help drive the insurance value chain. It predicts that new pricing models, based on continuous data analysis, will emerge. These models could include premium pricing options that factor the degree to which a policyholder shares personal data. Bonus programs for meeting set targets and flexible premiums are also highlighted in the report.
Life insurers will be equipped with a tremendous amount of data-points that will shape their strategy on how much capital to reserve (and it’s important to note that the available reserve generated by accurate pricing can be invested). Real-time, granular data and frequent touch-points, along with statistical evidence and superior algorithms, will significantly improve the risk-reserve probability.
As an ancillary benefit, the more insurers can penetrate customers’ worlds, the more they can cross/up-sell and target family members with innovative, packaged deals.
The Big Picture
Continuous underwriting will empower insurers to positively affect their insureds’ lifestyles and to provide reduced underwriting risk. The accurate pricing and new, targeted products that result from continuous underwriting will also increase productivity.
My new white paper, “Continuous Underwriting is Underutilized in the Life Insurance Industry,” details the factors fueling continuous underwriting, offers some interesting mini-case studies and explains the essentials for continuous underwriting success.