We see 2020 as a pivotal year for life insurance underwriters. More insurers have modernized their new business and policy administrations systems to enable greater flexibility to create innovative products. These new systems integrate with powerful underwriting rules engines that also automate much of the underwriting process—even completing the evidence gathering process—before a human underwriter gets involved.
Insurers have also invested in predictive analytics capabilities and cloud computing power to build, test and predict product profitability with greater certainty. All this is occurring amid the backdrop of technological innovations and insurtech disruptors that are moving the industry toward connected health and wellness ecosystems, the Internet of Things (IoT) and the intensified focus on customer experience to attract millennial and generation Z demographics while retaining existing customers.
When you consider how this similar backdrop has played out in other industries such as media, telecom, manufacturing and others, providers have responded with more bespoke products and services, combined with partnerships and alliances to fill gaps or enhance offerings. All of these trends are reflected in our 2020 underwriting predictions, and some are a continuation of our predictions from the last two years. At the heart of it all is the underwriting function, so here are our predictions for 2020 and beyond:
- Underwriting is making the “Shift Left.” The practice of “Shift Left” in software development moves process tasks, such as testing, to the left or earlier in the process, with the goal to improve quality and streamline the process. The underwriting process shifting left begins the instant an electronic application is submitted. Intelligent automation and sophisticated rules engines initiate the process of gathering evidence. Combined with a growing list of third-party-data sources, such as electronic health and medical records, a significant portion of the underwriting process can be completed without human intervention. For lower face-value policies ($250,000 and less), this shift left enables insurers to process a higher volume of applications using straight through processing (STP) and provide a decision within minutes instead of days or weeks. More importantly, the quality and consistency of underwriting is on par with human underwriting, freeing valuable human underwriters to focus on higher face-value policies that require conventional evidence.As advances continue in artificial intelligence (AI), machine learning, and integration with new electronic sources of evidence, we predict that 2020 will see an accelerated adoption of these technologies and data sources.
- Connected health platforms will begin to influence underwriting. While still in the innovator and early adopter cycles, connected health platforms represent another data source that can mitigate risk for underwriters. These platforms leverage data from wearable technologies such as fitness trackers and other sensors. Currently a typical smart watch has at least six sensors, and with the advance to 5G networks and further miniaturization, biometric sensors will proliferate, bringing on more potential data points for health platforms to access. In addition to sensing technology, health-risk engines are emerging that apply risk scores based on hundreds of person-hours of clinical data and biometric sensors to help underwriters better assess critical illness risks. The predictive capabilities of these platforms present potential new opportunity for insurers to expand STP to higher face-value amounts. They also enable a continuous underwriting, “pay-as-you-live,” process whereby insurers can increase engagement with policyholders and provide wellness incentives in the form of premium discounts and rewards, in addition to complementary product offers over the life of the policy.Look for the connected health and wellness space to grow. In fact, CNET reported a 15 percent increase in floor space dedicated to health tech at last year’s Consumer Electronics Show (CES). The health and wellness space is ripe with innovation coming from some established and new well-funded insurtechs.On a cautionary note, look for new and existing legislation to evolve around data privacy and how the use of biometric and clinical data may be limited.
- Blockchain and distributed ledger technology (DLT) will move from pilots to production. Despite blockchain’s slow initial uptake, we think 2020 could be the breakout year for life insurance based on three factors: (1) maturing software platforms behind DLT solutions, (2) carriers looking to DLT as a means to unlock efficiencies, and (3) the growing use of ecosystems and partnerships across our industry presents an opportunity to unlock the value of DLT. We see continued proliferation of digital platforms and the exchange of heavily regulated data, much of which is used in the evidence-gathering phase of the underwriting process. Expect regulators and insurers to team up through blockchain alliances with the goal of establishing rules that govern the way insurers engage with their partners and ecosystems. Over the next several years, we think the use of DLT in the underwriting process could result in substantial improvements in efficiency and cost reduction as a result of the inherent trust and transparency within DLT, particularly when combined with automation. At the very least, DLT will share a unified view of the core information that drives insurance ecosystems.
Teamwork is key to winning with blockchain. Look for additional use cases for DLT to emerge in the life and annuity industry through The Institutes RiskStream Collaborative, an industry-led consortium, of which Accenture is a member, collaborating to unlock blockchain potential across the insurance industry. Though blockchain in underwriting may be in the distant future, “tomorrow’s winners will be those who invest in distributed ledger technology (DLT) today.” That’s how my colleague, Jim Bramblet, summed up blockchain from the panel he moderated at the 2019 InsureTech Connect conference.
As we enter this new decade, we see opportunity to drive revenue growth and address margin pressures through improved speed and accuracy in underwriting resulting from growing sources of third-party data and advancing predictive analytics capabilities. Blockchain adds another level of trust and transparency to the underwriting process. We expect more insurers to scale from proofs of concept to production-grade systems, bringing down the barriers to these technologies and increasing return on their investments.
Building Value with Blockchain Technology: How to Evaluate Blockchain’s Benefits, World Economic Forum, July 2019