US life insurers have been slow in
adopting automated underwriting but are finally accepting it as a
solution, reveals a report authored by Clark Troy, a senior analyst
with consultancy Aite Group.
Troy explained that automated underwriting is
the life insurance equivalent of straight-through processing.
Solutions, he added, have been evolving since the 1990s and are
used widely in Australia, South Africa and the UK.
Go deeper with GlobalData
In the US, automated underwriting is now
increasing in popularity among insurers selling insurance to the
middle class, a group underserved by insurers focused on selling to
high-net-worth individuals.
“Life insurers are finding that automated
underwriting solutions can provide many benefits, including a
reduction in underwriting time and costs, and a means to reach new
markets efficiently,” said Troy.
In addition to developed insurance markets,
Troy noted that automated underwriting has also become an integral
part of strategy to expand in emerging markets, particularly India
and China, where huge volumes of low face-amount policies are
sold.
He explained that a range of automated
underwriting solutions is available. The solutions base decisions
on responses to questions posed to applicants or in combination
with data obtained from third-party vendors.
Major automated underwriting solution vendors
include information technology specialists Accenture, Allfinanz,
Computer Science Corporation, MajescoMastek, PlanetSoft and
StoneRiver.
A number of reinsurers are also active solution
vendors and include General Re, Hannover Re, RGA Reinsurance, Swiss
Re and Transamerica Re.
Indicative of the capabilities of automated
underwriting is a solution from Irish vendor Allfinanz deployed by
UK insurer Standard Life in 2003. Standard Life estimates that one
application submitted on paper and not requiring an underwriter’s
attention costs the same as nine similar cases submitted online and
assessed automatically by Allfinanz’s solution.
Standard Life noted that a major advantage to
advisers is that a clean online submission should take around 20
minutes to complete, providing a decision there and then for the
customer, compared with between three and six days for paper
applications.
