-by DuWayne Kilbo
The tension is palpable.
Underwriting is being turned on its head, driven by big data, automation, alternative risk assessment tools, and more predictive underwriting models and processes augmented by analytics.
Go to any underwriting industry meeting and there will be considerable time and energy devoted to one or more of these topics, along with a fair amount of angst among the underwriting folks present.
Traditional and new industry players speak about the latest risk assessment models and tools, back-tested through hundreds of thousands of client records and data points, producing mortality results similar to existing methods at a fraction of the cost and in light speed when compared to most existing underwriting processes. In addition, these new tools require less, and sometimes no, human underwriting intervention.
A new world of life underwriting is being ushered in. And it’s scary for the underwriting profession.
Driven by the under-served and uninsured markets, aging and shrinking producer distribution models, increases in carrier retention (with a focus on mortality as a profit center), a need to find new sources of revenue, direct to consumer distribution models, and technology players promoting lower cost and faster underwriting methods, the table has been set for change.
For the underwriting profession change was needed, and some would suggest long overdue. Underwriting has been pretty much “business as usual” for the past 25 years. Today, long waits of up to several weeks typically occur for a policy to be approved and issued—even for simple, modest face amount cases. No business or industry can expect to be successful or even survive long-term using this type of model.
On top of this, consumers, especially younger buyers, are demanding a better insurance acquisition experience, and don’t care about the disruption that creates for the life industry and its various players. Though it may be an overstatement to say that traditional life underwriting is facing an existential threat, it could go down that road if the industry doesn’t adapt to customer needs and wants. The industry needs to keep things affordable, and make processes faster and easier for the insurance buying consumer.
So what does this mean for the life underwriting industry? Is this no good, ugly, and scary for the underwriting profession?
In some respects, yes.
But in more important aspects where underwriting talents and skill sets are essential, no.
First, with new data sources and underwriting tools, predictive models, automation, and perhaps even artificial intelligence, the demand for underwriters—on a pure numbers basis—will be less. This will be viewed as a negative by some, and certainly doesn’t feel good for the people impacted.
It’s absolutely necessary to automate and streamline as much as possible in ways that make sense and provide value to the customer. No business survives or even thrives without addressing what customers need and how they want services or products delivered, with much of the delivery achieved through automation. This may require fewer underwriting resources, and it is inevitable.
However, while automation, predictive analytics, and other newer tools lend themselves to clean cases with reasonable face amounts, they don’t necessarily provide the same level of comfort for large face amount and medically impaired risks.
These latter cases require high level human intervention, where complex thought and interaction are required. This is what underwriters provide to the risk appraisal process. Also, these things are difficult, if not impossible, to program into algorithms. While new tools and data sources may add to or support decision-making and perhaps streamline processes, mispriced mortality is unforgiving. Replacing the human element in these situations is risky and very unwise.
Second, besides technical skills, underwriters possess “soft” human interaction talents to create loyal customers and repeat business. Through their knowledge, understanding and engagement, underwriters have unique perspectives to interact with carriers, and among sales organizations, producers, customers and others. These skills are extremely valuable and cannot be algorithmically programmed. Just try to create any type of dialogue with “Siri” or “Alexa” and you’ll see what I mean.
Lastly, underwriters provide leadership to help guide their organizations and industry through challenges and to the next level, especially concerning mortality-related issues. Some underwriters are very good at doing this within their organizations and industry, while others are not. For those who are not it is imperative that they get better. And some companies are very good at inclusive decision- making, while others are not. In either case, underwriting must find or create a place at the table to have an impact on the direction of their companies and the future of the life insurance industry.
The future for underwriting in this writer’s opinion is exciting—not “no good, ugly, or scary.”
With any change comes opportunity.
There is so much to be done and accomplished. By learning new skills and uncovering new talents to propel the profession and industry forward, underwriters can provide additional value to their organizations and to others. This may include learning things beyond what they do today, such as statistical analysis, data applications, products, illustrations, sales concepts and more, providing fresh perspectives and new solutions for their organizations, customers and production sources.
For over 40 years, Windsor has responded to change in ways that created new advantages and opportunities for everyone we work with. It’s what we do.
Now is the time for revitalization.
The future doesn’t need to be scary.