Automating the Underwriting Process: A Strategic Approach

By Insurance CIO Outlook | Monday, November 12, 2018

The innovation of the underwriting process has created changes in various industries. The need for underwriting process is to penetrate the underserved middle and growing millennial markets. Carriers believe that a better buying experience would produce more sales. Understanding this, companies have made advancements in the simplified issue (SI) arena where e-data and software algorithms enable point of sale and policy issue for face amounts. The larger amounts of coverage have not been viable through SI underwriting tool. Hence, automated underwriting was innovated to overcome the disadvantages faced by underwriting.

Principal Financial, a life insurer introduced an accelerated underwriting (AU) program for face amounts up to a million dollars with the same characteristics and premium as a fully underwritten product.

Now, the approach to AU that companies take varies from automating traditional underwriting process to assessing risk with non-medical e-data and predictive analytics.  The programs are offering larger amounts of coverage at fully underwritten rates. SCOR, a reinsurer, participated in the transformation of the underwriting process on several levels such as an innovative solutions provider (Velogica). It acts as a thought leader and consultant, helping its clients to develop AU programs.

Velogica, an underwriting platform, and algorithm, uses electronic data in conjunction with application data to underwrite life insurance applications in real time. It has the ability to deliver the results within a minute. Velogica's algorithm develops a risk profile that considers each data source individually. Including positive or negative underwriting ramifications of relationships between data sources, Velogica provides a more precise recommendation. It also generates final underwriting recommendations on about 95 percent of simplified issue cases.

Velogica’s risk appraisal capabilities are incorporated into a traditional underwriting process that allows for more automation and point of sale recommendations. Applicants who are eligible for approval through Velogica engine can get coverage at the same premium rates, and those that are not eligible are triaged to traditional full underwriting. The recent version of Velogica has the ability to incorporate new sources of instantly available digital data that will be available soon on individual applicants.

SCOR provides R&D support to companies. It is implemented in predictive analytic models and rules engines. As a reinsurer, it helps clients to understand and manage new risks. It also believes that the future of life insurance depends on transforming the underwriting process faster, easier, and less expensive.

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