The climate for accelerated underwriting (AUW) has reached a significant level of maturity. To evaluate the current state, PartnerRe recently surveyed 25 US carriers, delving into their AUW programs. Although accelerated underwriting is not a new concept, this novel approach of in-depth interviews resulted in engaging discussions that explored nuances of their respective programs and allowed for better understanding of their accelerated underwriting journeys.
Karen Phelan, VP Underwriting Strategy & Innovation, US Life, shares the key takeaways from the survey which offers qualitative insights into the successes, challenges, and future plans of these programs.
Most programs target issue ages between 18-60, with maximum face amounts averaging $1-2M, and some carriers going up to $3-5M. This range allows insurers to cover a broad demographic, from young adults embarking on their careers to individuals nearing retirement. The flexibility in face amounts helps cater to varying financial needs and risk profiles.
Common data sources for AUW include the application itself, MIB Checking Service, prescription history, and driving history, with some carriers also using electronic health records and criminal history. These diverse data sources enable insurers to assess risk efficiently without invasive medical exams.
To ensure the integrity of the underwriting process, carriers monitor their AUW business through methods such as Random Holdouts, used by 42% of carriers, and Post-Issue Audits, employed by 83%, allowing them to periodically review decisions and identify issues and areas for improvement.
AUW cases have a significantly faster average turnaround time, averaging 8 days compared to 28 days for fully underwritten cases. Placement rates for AUW range from 60-98%, while fully underwritten cases range from 66-85%, highlighting the efficiency of AUW in both time and success rates. However, the average mortality slippage in AUW is around 13%, reflecting the gap between expected and actual mortality rates. Managing this slippage is critical to improving the accuracy and financial stability of AUW programs. This topic is discussed in more detail in our whitepaper, Decline Mortality: Shape and Severity of Mortality for Declinable Life Insurance Risks.
Overall, 71% of carriers indicated that their AUW programs met their expectations. However, many carriers recognize the need for improvements, particularly in monitoring, IT support, and integration with new data sources. To address these challenges, they plan to reduce slippage, manage costs, and accelerate processes by enhancing monitoring, expanding eligibility limits, and optimizing data sources. These strategic changes aim to refine the underwriting process, improve risk assessment accuracy, and provide better service to policyholders.
Accelerated underwriting programs continue to evolve, with the industry shifting towards a more comprehensive approach tailoring the right mix of requirements for each applicant rather than applying a standardized set across a group of proposed insureds. At PartnerRe, our client partners collaborate closely with carriers to support this evolution, offering invaluable expertise and guidance. This partnership ensures we remain adaptive and innovative, helping us meet the unique needs of our clients while staying ahead of industry trends.
For a more in-depth analysis and detailed findings, access the full report.
Contributor
Karen Phelan, VP Underwriting Strategy & Innovation, US Life