5 benefits of an automated underwriting system for life insurers

The average buyer’s journey for life insurance – from point of interest to end sale – is not suited to the modern consumer. Whether it’s too complex, invasive or discriminatory, barriers are many and reasons to buy are seemingly few.

This has led to prevailing underinsurance in many parts of the globe, with consumers on average buying too little life insurance. In Canada, for example, over 90% of citizens with dependents are underinsured.

With the pandemic highlighting the urgent need for improved insurance coverage in family and life planning, global life insurance companies have a responsibility to ensure the customer journey is as simple and frictionless as possible all the way through.

Fortunately for insurers, there is a solution in existence that can deliver five of the key benefits necessary to make this a reality: an automated underwriting system – a tool which delivers advanced analytical modelling and predictive capabilities directly into existing underwriting and new-business processes.

1. Attract more customers with a digital-native experience                   

Consumer expectations are constantly changing thanks to transformations in technology. As more ‘out-there’ concepts like the metaverse become increasingly normalised, the expectation for all companies to be at least digitally-native is base-level.

And customers have not missed the fact that the insurance industry has so far been failing to keep up. A recent study by Deloitte found that 65% of Americans expect to see an increase in spending on robotic process automation (RPA) in insurance in 2022, while 74% expect more capital to go towards artificial intelligence (AI).

The onus is now on insurers to adapt to shifting demands. An automated underwriting system allows insurers to meet customers where they are: in 2022, on their digital devices, likely trying to tick off one of 50 tasks on that day’s to-do list. By matching consumer appetite for innovation, insurers will also find that they benefit from boosting their own reputation as an innovative, modern industry leader, thereby attracting more customers. And so the cycle continues.

2. Improve customer conversion rate with reduced barriers to entry

The average process for purchasing a premium today involves too many roadblocks. This means that insurers suffer significant drop-off somewhere along the way between a potential customer first expressing interest and entering their credit card details.

This is because the middle part of the underwriting process consists of long lists of questions, many of which are repetitive, and even medical examinations. Time-intensive and intrusive, such barriers are an understandable deterrent, particularly in an age where customers can purchase most other products and services online in seconds with the click of a button.

An automated underwriting system allows for customers considering buying life insurance to obtain it within minutes, as opposed to hours or days, by reducing the number of questions asked and information required, thus improving overall claims conversion.

3. Reduce human error and discrimination through data-driven decisions

The insurance industry relies heavily on its underwriters to simultaneously avoid profit loss by mitigating risk, while driving maximum profit gain by processing new customers. It’s a tricky balance to achieve, and one innately prone to subjective opinion and human error.

By leveraging AI and Machine Learning (ML) techniques, an automated underwriting system can empower insurers to improve objective risk analysis, leveraging the agnostic detection of patterns and connections in application responses that would typically be time-consuming and difficult to spot with the human eye alone.

Through these insights, which are driven by trackable data points but presented as easy-to-read messages, insurers can make better-informed, fairer underwriting decisions more quickly.

4. Improve internal efficiency to refocus on value-add

In addition to delivering improved speed and reduced time-wasting for customers, an automated underwriting system can save time and human resources internally, as well.

Life insurers can reap cost savings by automating typically resource-intensive tasks, and freeing up their underwriting staff to focus on areas where they an add most value, including more complex claims and customer service.

This is important as Deloitte’s study found that, while consumer preferences are certainly shifting toward greater digitisation and self-service capabilities, personal interaction with agents and brokers is still seen as a vital component to prospecting sales and service.

5. Deploy quickly and flexibly

Contrary to popular industry opinion, while an automated underwriting system can certainly revolutionise the customer’s experience, it doesn’t require an internal revolution.

The ‘plug-and-play’ nature of these new tools means insurers can set the rules and parameters of existing models for quick and customised deployment, and update them easily in response to developments in the regulatory or health landscape, without the need for IT or programming support. This allows them to respond more quickly in future to new risks that arise from unforeseen crises, such as a pandemic. 

With digital and cloud-based capabilities, deployment of an automated underwriting system is also made easier by eliminating the requirement for staff to be on-site for integrations.