A PINCH OF ACCELERATED UNDERWRITING AND A DASH OF SIMPLIFIED ISSUE: COULD IT BE THE PERFECT RECIPE FOR RISK?
Taylor Pickett Actuary, Pricing, US Indiv. Life RGA
Mike Cusumano VP & Actuary, US Indiv. Life RGA
[ Reprinted with permission from RGA ]
Executive Summary Take a closer look at the complex spectrum between traditional SI and AU and discover new ingredients for life products that can increase customer satisfaction, attract the right risks and maintain low mortality. Delicious duos like cookies & milk and peanut butter & jelly are imminently accessible if you have the right ingredients. Yet in insurance product develop - ment, the most desirable pairing – easy customer experience and low mortality – can sometimes feel tantalizingly out of reach. How close is the indus - try to bringing together the best of both worlds? What challenges remain? This article explores the space between accelerated underwriting (AU) and simplified issue (SI), and offers key considerations for insurers eager to whip up products that meet customer needs and satisfy their own appetite for risk and price.
Background First, a basic definition of terms: AU is a modification of traditional full underwriting (FUW), where a por - tion of applicants with favorable risk characteristics can forgo time- and cost-intensive routine require- ments, most often fluid testing and a paramedical examination. SI is further removed from the FUW process, featuring an abbreviated application and reduced evidence ordering, with no applicants un- dergoing fluid testing or paramedical exams. Insurers experience a sizable mortality gap between FUW/AU and SI. To match the historical SI experi - ence outside the contestable period, FUW would need to be loaded up with an additional about 150% to account for the SI product’s mortality slippage, which is significantly higher than most AU programs’ anticipated slippage of 30% or less. Addressing this mortality gap is central to achieving the best-of-both-worlds scenario: a fast, easy, fluid - less customer underwriting experience and the lower mortality outcomes of AU. Rather than jumping from one extreme to the other, the most workable solu- tion may be aiming for meaningful progress toward a middle ground. Differentiators in This Space Insurers are employing a variety of strategies to ex - pedite underwriting decisions while keeping a close watch on mortality. • Applications : A full Part 2 medical history state - ment with reflexive questions is common for AU applications. SI applications historically use a short-form app with just a handful of questions. If insurers are looking for places to ease customer burden, other options hold more promise. That’s
because application disclosures become more critical in the absence of physical measurements and current lab results. Those disclosures can be particularly helpful in obtaining information such as build, tobacco use and family history, which can sometimes be challenging to discover through structured digital health data.
ON THE RISK vol.40 n.3 (2024)
74
Powered by FlippingBook