Figure 2 provides a high-level visual of where the industry was in early 2020, specifically, the proportion of companies offering Accelerated Underwriting to applicants within each five-year age band and face amount groupings. All 30 companies surveyed were offering AUW to applicants between 21-40 and $250k-$500k, then we see a gradual drop off of companies starting issue age 40 and face amount $500k, with the steepest drop off at issue age of 60 and face amount $1m (the median upper limits). 

While there has been a noticeable shift in maximum face amount offerings in recent years, it’s important to keep in mind that not all AUW face amount bands are available to all AUW eligible issue ages, as evidenced by Figure 2. In addition to offering a banded eligibility structure, as reported by one-third of companies, some programs may pair high maximum issue ages and face amounts with conservative underwriting criteria, which is often accompanied by lower accelerated offer rates. This is often an intentional marketing strategy that allows companies to advertise lower premium rates or higher face amounts to attract a larger applicant pool.

Arguably, what resulted in the most attention from the industry at the time changes were being made, were AUW face amount expansions. While initially considered “temporary,” these face amount increases were deemed necessary by many carriers in order to underwrite applicants at higher face amount bands that would have been served by full underwriting under normal circumstances. 

For a more detailed visual of the COVID-19 impacts on AUW age and amount limits by percentage of companies, see Figure 3, which can be compared against Figure 2 from earlier in this section of the report.

From the visual above, we see a mix of AUW issue age limitations at the oldest ages and expansions at the younger AUW issue age limits, particularly at the higher face amounts. We see a clear trend in that the most common modification was an increase in AUW eligible face amounts from $1m up to $2m or $3m maximum face amounts, primarily in the under 50 issue age cohorts. To the extent that we are aware of a company’s reason for AUW eligibility changes, this view excludes any pre-planned 2020 eligibility changes that were decided on prior to the emergence of COVID-19.

The risk class structure of accelerated underwritten products continues to expand, with 67% of companies now offering the same number of standard and preferred risk classes as their traditionally underwritten products, up from 50% of companies in 2018.

Most commonly, four non-tobacco (NT) classes were reported for both the traditional and accelerated underwriting paths, while two tobacco (TB) classes was the most common for both FUW and AUW.  The vast majority of AUW programs, 83%, now allow tobacco users to go through their AUW program, up from 67% in 2018. 

One AUW risk class feature that has remained stable since 2018 is the availability of substandard classes which approximately one-quarter of AUW programs continue to offer.  However, for those programs that do accelerate substandard risks, more limitations are placed on the substandard table ratings offered, with the median AUW substandard table rating available up to table 4 (D), compared to a median substandard rating of table 15 (O) on the FUW side. This likely explains why we saw a lower prevalence of COVID-19 driven “underwriting class limitations” in accelerated underwriting compared to traditional underwriting, as it was common for many companies to temporarily restrict offers to the most impaired substandard risks. 

All the companies that responded to the 2020 survey reported having a monitoring control put in place, whether it be random holdouts (RHOs), post-issue APS (PIA) audits, or other post-issue techniques.  The most commonly used “other” post-issue tools include MIB Plan F, followed by Rx post-issue check, and underwriter review.

Random holdouts are a monitoring technique in which cases in the accelerated underwriting workflow are randomly selected to go through the traditional underwriting process, in order to compare the FUW assigned risk class to that of the AUW outcome. The majority (57%) of companies conducted random holdouts as of June 2020.  The median and most common RHO rate is 5%, or 1 out of 20 cases, with 7.1% being the average holdout rate reported in 2020.

Similarly, we also see 57% of companies conducting post-issue APS audits, with an overlapping 23% performing both RHO and PIA techniques. The median and most commonly reported PIA audit rate was 10%, or 1 in 10 issued policies, while the average APS audit rate was 17.3%.  Some companies perform APS audits instead of RHOs because they don’t offer a fully underwritten alternative. Others prefer the post-issue audit process because they are less impactful to the customer experience, with the exception of material misrepresentation that can later lead to a live rescission of the AUW issued policy. 

Compared to 2018, we have seen a notable shift away from carriers performing a combination of both RHO and PIA monitoring practices towards just one of these auditing methods, often supplemented with other post-issue techniques, as listed above. Some companies intentionally dialed down their initial monitoring efforts once they were out of the pilot stage and gained comfort with the emerging trends, while others scaled back monitoring efforts directly as a result of COVID-19. As seen in figure 1, “monitoring processes” was the item with the largest differential in AUW program modifications over FUW program modifications. This can be explained by the same reason why “waived underwriting requirements” were more prevalent than the traditionally underwritten side. Traditional insurance labs were not easily accessible in the initial months of the pandemic. As a result, many AUW programs paused their existing monitoring processes or temporarily replaced them with alternative data sources.