Accelerated underwriting, or a AU, as a fluidless alternative to traditional full life insurance underwriting, can speed the insurance process and provide better coverage and pricing options for applicants. This evolving approach applies applicant data in a mortality-neutral way, acting as a proxy for paramedical visits and lab work necessary in full underwriting.
The risk assessments in AU should ideally yield the same underwriting decisions as would full underwriting.
The principal risk in using AU, however, is mortality slippage, i.e., the gap in mortality experience between accelerated policies and a fully underwritten baseline.
AU first emerged about a decade ago, but became more popular during the early months of the COVID-19 pandemic due to lockdowns and social distancing requirements.
Today's AU programs are synergistically structured around specific combinations of data sources.
Insurers must evaluate and align several elements to effectively implement this underwriting approach: insurer goals, policy characteristics, risk appetite, target market(s), data sources, data vendors, and overall program cost.
Here are seven to think about.
1. Insurer Goals
An insurer's philosophy, structure, size, book of business, risk tolerance, and other characteristics impact an AU program.
Ultimately, a company's decision to use AU must balance mortality protection with underwriting speed, placement, and convenience.
Conservative AU program goals might dictate waiting for an attending physician statement, or APS, to determine mortality, or prescreening applicants more carefully with additional requirements.
If a speedier process is the goal, then program choices might tend to skew to fewer requirements obtainable in a short time, which could impact the potential mortality slippage.
2. Policy Characteristics
Setting up an AU program begins with determining which products, features, and face amounts will reap the most significant returns from its use or bolster the insurer's competitive advantage.
For example, higher face amounts – those above $2 million – may need a more complex underwriting process to prevent mortality slippage.
In contrast, lower face amounts may lend themselves to AU but require appropriate safeguards to achieve goals and limit mortality slippage.
3. Risk Appetite
An insurance company's risk appetite often directly impacts its AU strategy.
Determining which tools and data are necessary to assess risk confidently means including factors such as the intended customer mix, growth goals, and comfort with mortality slippage.
4. Target Market
Each insurer sets applicant eligibility requirements and exclusions in order to control risk selection based on specific target markets.
Doing so involves balancing the risk or growth of a book of business in accordance with applicant characteristics such as income, occupation, location, or age.
Third-party data used in AU can also be leveraged to cross-sell and upsell life insurance products tailored to particular consumers.
5. Data Source
Adequate and predictive alternative data are necessary for mortality-neutral risk assessment in order to protect against mortality slippage.
Such data sources can include attending physician statements, credit information, electronic health records, healthcare claims data, lab results, and patient portals.
Catie Muccigrosso is vice president and chief underwriter at Reinsurance Group of America, a life and health reinsurer.
