COVID-19 Impact on Life New Business and Underwriting
Has COVID-19 made people think more about life insurance? Data has shown they have. Google searches for life insurance that worldwide searches for “life insurance” jumped 50% in March to May compared to the previous periods in 2019. This level of searching suggests that COVID-19 has made people consider their mortality more than anytime in the near past.
MIB’s Life Index shows a 4% increase in US life insurance applications YTD in 2020 over 2019. It also shows that the growth is coming from applicants less than 60 years old.Comparing Q3 2020 to Q3 2019, MIB reported that applications rose 12.8% in the 0-44 age group and 9.2% in the 45-59 age group.
And to add one more statistic, LIMRA’s Second Quarter 2020 U.S. Individual Life Insurance Sales Survey showed that term life insurance premiums are up 5% over last year and policy counts rose 6%.Term insurance rose to 24% of total premium, up from it’s average of 21%.During the same time period, whole life premiums fell, but policy counts were up. Most other products saw decreases in both volume and premium.What’s most interesting is that direct to consumer sales are increasing and the life insurance market is reaching the elusive younger, uninsured cohort with simpler products.
What has been the impact on life insurance companies?
Life insurance applications typically include a face-to-face visit with an agent to complete an application and then a myriad of underwriting requirements to complete the underwriting process, but COVID-19 made labs, doctors visits, and in person meetings impossible. Insurers adapted.Many life insurers quickly began offering no-exam policies with prices that match their policies that required an exam.They still may require a medical exam if the coverage amount is high or if you are older and have health issues. Some go up to $1 million (or more) in coverage, so for many younger buyers the no-exam policies are suitable.
This move to ‘fluidless’ applications for simple products is not new. Insurers have been moving towards an underwriting process that includes data (such as electronic health records and prescription databases) as a substitute for medical exams. They also had been implementing technology to digitalize the life insurance buying experience. But until COVID-19 hit, it had been a slow transition.
Now, we see electronic application volumes increasing as are electronic delivery of policies. These once nice to have technologies have become imperative as they have the increase the ability for a prospective policyholder to begin and end their sales journey online. Direct to consumer sales are also up. Haven Life Insurance Agency, owned by MassMutual, saw a 34% jump in the number of life insurance policies it sold during the second and third quarters this year, versus the same time last year. The insurer only sells term insurance.
Other no touch resources are being investigated to underwrite and approve cases. This includes data-driven, accelerated underwriting for simplified products using underwriting rules engines and automated underwriting workbenches.
COVID-19 has accelerated the need for life insurers to rethink their new business and underwriting process. The process has to be more digital, less invasive and less burdensome to the applicant and it has to provide coverage more quickly, but it still has to cover the insurer risk.
What should you do?
Celent’s recent research can help an insurer who wants to improve their underwriting processes for no-exam or ‘fluidless’ policies. New Business and Underwriting Systems: North America Life Insurance Edition profiles 14 systems in use by or being marketed for North American life, health, and annuities products. It should help insurers as they refine their new business and underwriting technology strategies and, when needed, create a list of appropriate vendors for evaluation. Celent recommends also using VendorMatch to further your search and understanding of these systems.
In addition, Celent recommends life insurers should, if they have not already:
- Investigate third-party data sources that allow for no-exam and fluidless underwriting.
- Investigate models like LifeScore Labs and LexisNexis Risk Classifier that use historical data to correlate risks with medical and non-medical factors.
- Investigate ways to integrate electronic health records with products from Clareto or Verisk to assess risk.
- Build out and enhance self-service options and online journeys.
From electronic applications and straight-through processing (STP) to no-touch automated underwriting and electronic delivery of policies, insurers today have a lot of options to move to a more digital new business and underwriting process. The pandemic has accelerated this process so be sure not be playing catch up in 2021.