Life Insurance Underwriting - Is It Changing Fast Enough?
Every two years we do a deep dive into life insurance underwriting systems. We look at the functionality offered by the systems sold by about two dozen software vendors and reinsurers across the globe. Expect our 2022 reports on these systems in late Q4 2022. Our underwriting research will also look at what insurers are doing with the software as they digitize the new business process, move away from full underwriting to accelerated underwriting, and find ways to make their business more efficient.
What might we expect to see? I will hypothesize that while the world is changing around us, so too is life insurance underwriting. However, how fast it has changed during the pandemic is one of the questions we all want answered. What data is being used today that wasn't in the past? How has the access to this data reduced the need for full underwriting on products? And where is this going?
We believe that we will see the tried and true top three data sources still being used: motor vehicle records (MVR), Medical Information Bureau (MIB), and pharmaceutical records (Rx). However, we believe we will see an increase in these and other non-medical records as insurers look to increase their STP rates and rely more heavily on automated underwriting algorithms. We also believe we will see a decrease in medical underwriting as non-medical data increases. Electronic health records (EHRs) will be more prevalent as will data from digital sources like fitness apps and monitoring devices. Machine learning and artificial intelligence will provide additional input providing what evidence was ordered and the underwriting class for other applications that look like this one. These changes may seem small, but for an industry that has been forced to adopt a more digital process during the pandemic, the we think the progress in the last two years has surpassed what was done in the last twenty.
And where will life insurance underwriting go from here?
A recent Oliver Wyman blog on genomics discussed their previous predictions regarding their use. In 2010 they suggested that by 2020, a third wave of genomic use would be taking place: the science of prevention. They imagined a $100 saliva-based genomic-sequencing test available in retail health stores and mobile apps that navigate health profiles. Today genomic testing is down to $300 from millions in 2001, and it is on target to reach $100 imminently. But what was more interesting was their prediction of what could happen if mass access to genetic testing becomes mainstream. Availability will bring "a paradigm shift from sequencing only those with risk factors (such as someone’s family history or medical symptoms) to sequencing proactively to identify risk factors." Everyone could have their own "genomic data capital" which could be used across health care and, as we see it, life insurance underwriting.
OW makes a few predictions that we believe will impact underwriting, like the transition from treatment to prevention. Being able to prescribe drugs, wearable, and digital tools could reduce the prevalence and impact of costly and deadly diseases like obesity, diabetes, and heart disease. OW predicts that EHRs will become EHGRs, or electronic health and genetics records, everyone will have access to their genetic data, and doctors will provide genetic counseling. And they also predict that as consumers get comfortable with third-parties holding their genetic data, they have to be careful of the potential for genetic prejudices/exploitation. The consumer will have to advocate for themselves by showing that their everyday life decisions impacting nutrition, fitness, and lifestyle are managing their own risks. This will disrupt underwriting because not only will genomic data be a part of the underwriting, data from digital sources will also be a necessary part of the decision.
The future of genomics even having a place in life insurance underwriting depends on technology to create the genomic data and the tools to make the data actionable, but even more on the insurance regulators decision to allow it based on whether consumers want it, however our opinion is that the health and life insurers will find it game-changing. If OW predictions come true, we could see it as part of the underwriting tool kit by 2033! We will check back in and let you know.