To Grow Disability Sales, Think Outside The (Information) Box

Take a look at the hospital industry–it provides extensive amounts of publicly available information that can be leveraged to help carriers better price disability products and prospect for new business. Disability RMS has analyzed quantitative data from numerous sources including Solucient's "The Comparative Performance of U.S. Hospitals–The Sourcebook 2003." Hospital occupancy rates, hospital profitability measurements, and cost containment and expense management information were examined. The analysis revealed a compelling link between claims experience and hospital occupancy rates, and found that higher occupancy rates correlated to higher claims experience.

Armed with this type of information, carriers can more accurately price products for these institutions and better create a highly targeted prospecting list for their brokers. Other types of information that carriers should consider leveraging to build prospecting lists include: facts about home ownership, credit scores, food purchased and physical activity level–all of which is available from a variety of sources.

Credibility formulas alone equal underpricing and churn. Another area of improvement can be found within the midsize case market and the use of experience rating. For years, underwriters have chased the "great case" or the "no-claims-in-three-years" case and have driven prices to an unsustainable level. The believability or credibility of a midsize case may be grossly overstated. Credibility formulas generally do not account for the predictability of the past. Carriers need to better understand the case history, the quality of the information being underwritten and changes in the environment. Using a purely formulaic approach to underwriting midsize cases will likely lead to underpricing and churn.

Furthermore, credibility formulas should be significantly adjusted on a case-by-case basis for these midsize groups. Some carriers now employ intricate methods to pinpoint how much credibility they are going to attribute to a midsize case. Factors such as plan design and history, actual-to-expected claims review and quality of data come together to adjust credibility, up or down.

New data resources: Think outside the information box. In an age where information is easily accessible, companies now have the ability to gather and apply data previously inaccessible to the insurer without asking brokers. Nontraditional information sources could hold the key to better underwriting allowing carriers to match the plan census to the demographic.

The opportunity and the tools necessary to grow in-force blocks exist. Utilizing contemporary information sources and purposefully integrating nontraditional demographic data into underwriting models will drive better or more stable pricing and support longer-term customer relationships.