Underwriting – Where are we today? Where are we headed?

-by DuWayne Kilbo

Being fed by our aging producer population, the under-insured and under-served markets, the $15 trillion plus insurance gap, and the search for new and easier ways to access markets—especially the technologically inclined millennials— life insurance companies are beginning to turn the traditional underwriting process on its head. And early results indicate that they are finding some success.

Much of what we have seen so far has been positive and a welcome transformation of an otherwise archaic, invasive and time-consuming insurance acquisition process.  However, these changes have implications both for distribution and for how business will be processed and underwritten in the future.  So where are we today?  What major underwriting process change are we seeing now? Where are we headed down the road? What implications do these changes have for you and your clients?

Solution and Strategy Path

The top underwriting process change we are seeing today is “Triage” or Accelerated Underwriting (AU). While there have been other successful efforts to use predictive analytics (such as lab scoring) in underwriting during the past few years, the AU process takes predictive analytics to new levels where traditional underwriting tools used to qualify applicants for coverage, such as paramedical exams, vitals and fluids are being replaced with noninvasive third-party data.

Anecdotal carrier information indicates that up to 50% of applicants who go through the AU process may forgo traditional exam requirements and be issued coverage in as little as two days. However, this number is a bit misleading since younger applicants, those age 45 and lower, qualify at a disproportionately greater rate than older applicants.

AU has taken a firm hold in the industry with carriers adopting it as a standard underwriting process or studying it closely with the idea of rolling out the process within a short period.  Within a couple of years this could be “the” underwriting process that distribution must adhere to for all carriers up to a certain applicant age and face amount.

So what are the pluses and negatives for AU?

Overall, this process is a positive for distribution. It’s a win if on average up to 50% of our insureds, within an age and face amount range, are not required to complete a paramed exam, or blood and urine specimens, avoiding the potentially adverse findings that sometimes come from these requirements. This abbreviated underwriting process can also cut days or weeks off the underwriting approval time, which is always a good result.

On the negative side, we lose some control over the application and underwriting process. AU usually requires a carrier teleinterview, and, due to the third-party sources of information and algorithmic modeling used in this process, we cannot be 100% sure that an applicant will qualify for coverage without the need for traditional exam requirements.  In view of this, it is important to serve up these types of programs as a possibility, and not as a promise that an applicant will not need to submit exam requirements.

What about the future?  It started with AU, but where is underwriting going? What’s coming down the road?


One of the most profound risk assessment paradigms being discussed today is the concept of Underwriting Agility.  This model suggests that applicants should be underwritten and priced independently, based upon their unique set of risk factors. In addition, underwriting requirements will be based upon the risk profile and available information for each applicant rather than the typical age/amount underwriting chart. With this model, insurers will request more information on higher risk applicants and less information on lower risk applicants. When combining this information with third-party data sources and analytics, Underwriting Agility will provide a more complete and holistic underwriting assessment.

Bottom line, with Underwriting Agility not everyone will follow the same process and applicants will be priced on a continuum according to the risk they represent, with premium being specific to the individual – much like auto insurers do today.  This is unlike the current underwriting rating bucket system we have today that attempts to match and price an applicant in a category of similar individuals.

Here’s an example of what we are talking about:  Let’s say an age 60 male with a heart attack history five years ago applies for coverage.  Before putting the applicant through a medical exam, the carrier downloads a copy of his electronic medical records and/or medical record codes and finds his records are thorough and complete with all necessary follow-up doctor care. Other than the absence of a urine result, the applicant has had reasonably recent and favorable EKG and blood results, vital signs and other medical results comparable to those required for an insurance exam.  His data search indicates several positive risk attributes which analytical modeling suggests provides a mortality “lift” or enhancement. Based upon the information at hand, the carrier will only request a current urine specimen.  If the results of the specimen are normal, a premium quote can be tailored uniquely for this applicant, based upon the combined medical history and risk attributes.


This model will require an enormous amount of R&D to get right, along with new data elements, data sources (electronic health records, etc), predictive modeling and other things.  So it may take some time to develop and roll out. However, as the industry accumulates more information and access to new data sources, it will be here sooner than we realize.  Also, there may be an opportunity with this type of model to provide pricing incentives for the continuation of a healthy and active lifestyle, which can have a positive impact on product performance.

So what are the pluses and minuses of Underwriting Agility?

This process certainly has positives for distribution. Like AU, it’s a win if we don’t need to expose an applicant to the time and hassles of an unneeded paramed exam and the potential adverse findings that may come from these results. It can also cut days or weeks off the underwriting approval time, which for many reasons is always good.

However, this model also has significant negatives in that we may lose negotiation leverage with underwriting due to the amount and reliability of data collected and the ability of analytics to predict outcomes with a high degree of certainty.  In effect, the “price will be the price.” Risk classification and underwriting exceptions may be made, but based upon different criteria, relating to individual characteristics and the analytical modeling completed.  This model will require us to be well educated about data and analytics before it is implemented so we understand the pitfalls and potential areas for further underwriting discussion and opportunity.

It is important for us all to stay ahead of the winds of change and understand what these changes may mean to us and to our customers. We have seen more change in underwriting the past two years than in the previous decade.  Technology will be a driver of change and the pace of change will accelerate as new data sources are discovered or connected in new and unique ways, and as predictive analytics becomes even more dependable and refined. As all this comes together, it is certain that underwriting will become more “personal” and specific to the individual, along with premium pricing as well.  It is imperative to find ways to adapt and thrive as we push ahead in any new paradigm.

Golden key and puzzle

Throughout our 40 year history, Windsor has responded and evolved by creating unique advantages for our customers. As with any potential change there comes opportunity. We are committed and will stay engaged, keeping our finger on the pulse of our business to create advantages for those around us, no matter what the change may be.