“What is important is seldom urgent. And what is urgent is seldom important.” U.S. President Dwight Eisenhower famously used these words to describe decision-making in a crisis. Clearly, Eisenhower was no facultative underwriter.
Substandard, or facultative, submissions are both urgent and important, and as shortages of skilled underwriters loom and the pandemic grinds on, pressure is mounting to automate underwriting for more of these cases.
A Spectrum of Digitization
The reasons for automation seem obvious: The outbreak of COVID-19 has pushed the insurance world into the future faster, with forced lockdowns and social distancing prompting many carriers to digitize a range of functions, from distribution through claims adjudication. Acceleration has limits, however, and the stakes are highest when it comes to substandard submissions. Facultative cases exist on a spectrum of difficulty, and increasingly, insurers recognize that many of these substandard submissions benefit from a blend of human judgment and automated processes – a hybrid approach.
The benefits of hybridized life insurance solutions are not unique to the underwriting function, nor are they simply a reaction to COVID-19. Before the pandemic drove up levels of digitalization in a matter of months that would have otherwise taken years, the current limits of insurance automation were already becoming apparent. Consider distribution, in which sales traditionally made entirely via agents have migrated online. The typical insurance journey today begins on a website and, depending upon the nature of the product, the level of consumer engagement and complexity of the case can be completed either online or off. This fluid movement between assisted (human) and unassisted (digital) channels speeds sales by capitalizing on the strengths of both. The pandemic only accelerated this trend: According to a study from LIMRA and Boston Consulting Group (BCG) of consumers surveyed between July and August 2020, 40% of respondents bought life insurance using a hybrid of online and consulting with a financial professional, an increase of 10 percentage points compared with pre-pandemic purchases.1
No Longer Either / Or
Ironically, such experience suggests that by adding the right human element at the right time, insurers can more fully leverage rapid advances in technology and data analytics. The benefits of this approach are not limited to distribution and are evident throughout the insurance value chain, including at underwriting. The evolution of RGA’s ASAP (Automatic Selection and Assessment Program) represents a prime example. When it launched two decades ago, ASAP was the first software solution to provide immediate decisions on facultative cases with one or two impairments. ASAP requires minimal information and can generate competitive offers, even preferred status, for dozens of individual impairments and numerous dual impairments.
Yet ASAP also teaches important lessons about the limits of automation. Like most e-underwriting systems, ASAP is ruled by … rules: The technology functions best when it can apply an existing form of underwriting logic – a rule – to an impairment to arrive at a decision. When these rules are clear, the system functions beautifully, returning decisions in five minutes or less. Yet in practice it is nearly impossible to anticipate every combination of impairments that could potentially appear in a substandard application. Relatively straightforward impaired-risk cases often cannot pass through automated underwriting. For example, a submission from a ratable diabetic may also include a build impairment. It would not be unusual for an automated system to not have the requisite rules in place to rate both impairments together. Similar situations can arise around liver test results or evidence of marijuana use that require nuanced human interpretation due to unfamiliar circumstances or complex contexts.
On the other hand, the full facultative underwriting process requires insurers to submit complete case files – a level of exhaustive documentation that is often unjustified by cases of moderate complexity. What’s more, insurers may wait a week or longer to retrieve responses from all reinsurers, decreasing the likelihood of placing the case.
Any Impairment, Any Rating, Anytime
ASAP Infinity, launched in September, fills this gap, offering a path forward for mild-to-moderately complex impaired risks. Through strategic use of project management technology, ASAP Infinity applies a human underwriter’s judgement at just the right time in the underwriting process. The client underwriter submits case details and underwriting notes using the simple web interface, securely attaching supporting documents, if necessary. Insurers receive an offer via the same system in just a matter of hours, and in some cases turnaround time may be as rapid as 20 minutes or less.
ASAP Infinity relies on a secure file transfer system and a spate of highly experienced RGA underwriters. Each case is electronically forwarded to a human underwriter in the order it is received. There is no limit to the number of impairments, and any ratings can be considered. To avoid duplication in the underwriting process, insurers need not send a complete file and can expect a streamlined, priority review process within an automated queue.
ASAP Infinity represents an eminently practical solution – a recognition that even with the many notable advances in automated underwriting, substandard submissions are not one-size-fits-all but exist on a continuum of complexity. Because cases vary, those insurers who offer up hybrid solutions – the right combination of automation and human review – promise to be more adaptable, more agile, and better prepared for the post-pandemic era.