It is a transformative time for the life insurance industry as accelerated underwriting promises to reshape the way companies do business. The goal: to improve underwriting speed and efficiency while also preserving the reliability of the risk assessment process. Amid this dynamic environment, it’s easy for carriers to feel overwhelmed and at risk of being left behind. Fortunately, there is ample opportunity to catch up – and getting started is not as difficult as they might think.
Experts from RGA recently weighed in on the top questions and concerns they field from carriers regarding accelerated underwriting, and they bust some common myths on the topic.
Myth 1: Simplified issue and acceleration are the same thing.This is an important clarification to make at the outset. While both simplified issue and accelerated underwriting seek to more efficiently assess applicants and streamline the underwriting process, there are key distinctions between the two.
Simplified issue is an underwriting process that makes use of instantly available evidence along with a short application to determine if an underwriting offer can be made. Through automated underwriting, simplified issue can “accept” or “reject” an applicant with very few, if any, applications requiring human underwriting intervention. Accept rates are typically high, in the 70-90% range, and the preferred classes, if any, are typically limited to just one preferred non-tobacco class.
Accelerated underwriting, on the other hand, is a fully underwritten process that makes use of new data, tools and modeling techniques to triage applicants and determine if an underwriting offer can be made, without gathering all of the traditional underwriting evidence, such as paramedical exams and laboratory testing. Accelerated underwriting is meant to preserve the risk selection and underwriting class determination of a traditional fully underwritten process, but accomplishes this through the use of these new data and methods in combination with continuous monitoring and program refinement. As such, *accelerated underwriting makes use of a fully underwritten product issued at or close to fully underwritten retail rates with preferred classes. In addition, accelerated underwriting sets maximum issue ages and other eligibility requirements to control risk selection, and targets acceleration rates typically less than 50%, although it is important to note that this rate is heavily influenced by how the numerator and denominator is defined.
The accelerated process may be implemented with full automation, manually or some combination of the two. Ultimately this choice is up to the individual carrier and is oftentimes approached in an evolutionary manner. With the support of a trusted reinsurance partner, you can identify which program will best address your needs.
- Dianne Schuetz, Vice President, Business Initiatives, U.S. Markets, RGA
Companies are working to implement accelerated underwriting solutions, but there are definitely speed bumps to keep an eye out for. In the next article in this series on acceleration, we will present a roadmap of steps you can take to push acceleration forward in your organization.
Reprinted with permission of ON THE RISK, Journal of the Academy of Life Underwriting (www.ontherisk.com).