Expanding life insurance coverage with confidence
Dr. Dave Rengachary has a message for people with diabetes and other chronic conditions: Don’t be afraid to apply for life insurance.
Until a couple of decades ago, life insurers had limited visibility into an applicant’s underlying health, so a serious medical diagnosis often put easily accessible coverage out of reach—and families at risk. But thanks to digital data, insurers have more granular insights and are able to offer policies to more people with diabetes, HIV, and even cancer.
“I'm of the belief that a lot more consumers with chronic medical conditions would buy life insurance if they just understood that they qualify for life insurance,” says Rengachary, a physician and Senior Vice President, Head of Underwriting for U.S. Individual Life at RGA Reinsurance Company.
This expanded access is possible thanks to automated underwriting and other digital innovations developed by actuaries and technologists at Milliman IntelliScript. It’s just one of the many ways during the past quarter-century that IntelliScript has helped the life insurance industry evolve and more people protect their financial well-being.
From analog to automated underwriting
Life insurance has been around since the 1500s. But its biggest evolution came in the early 21st century, thanks to an epiphany in an emergency department.
To correctly price a policy, life insurers must understand the policyholder’s health and mortality risk. Before digitization, this underwriting took an average of 60 days, as applicants faxed or mailed records, provided blood samples, and underwent other clinical tests. In the interim, applicants might decide to redirect the money earmarked for insurance to another expense—and insurers would lose the several hundred dollars they’d invested in that person.
“The whole process was very manual, very time-consuming, and not very cost-effective or efficient,” recalls Angela Bolduc, Milliman Principal and IntelliScript Managing Director. “It didn’t always end with the consumer’s, or the insurer’s, needs met.”
The emergence of electronic health records sped the transfer of documents. And then, in the early 2000s, an ER doctor searching for patient history realized pharmacy records held clues to a person’s health.
IntelliScript’s founders knew this innovation could transform life insurance.
Segmenting risk, increasing insurance protections
Meeting rising consumer demands for convenience and speed
Despite these technological advances, the life insurance industry—which predates the telescope—was sometimes slow to adopt innovations. Some firms wondered, for example, if the data models could be trusted.
“If the data is off by even a small amount,” Rengachary explains, “the profitability of that policy or group of policies vanishes and becomes negative very quickly.”
To help the carriers they work with determine best practices, RGA researchers regularly evaluate automated underwriting tools. A recent study, for example, determined that IntelliScript’s combined use of prescription and diagnostic data helps insurers better pinpoint adverse risk.
“The more confidence you have in the accuracy of your data, the more aggressively you can price that risk,” Rengachary says.
Still, it was the COVID-19 pandemic that finally forced holdouts to embrace automated underwriting. Not only did the technology spare consumers, and clinicians, from the risk of in-person paramedical exams, but IntelliScript’s digital assessments aligned with the rising consumer expectation for fast and convenient experiences, empowering life insurers to make rapid policy decisions at the buying pace consumers prefer.
It meant a significant shift in underwriting guidelines.
“Our confidence in carriers being able to change their underwriting so quickly depended a lot on the data they were able to supply to support those changes,” Rengachary says. “The carriers that were engaged with Milliman, and had that data, were a step ahead.”
The result: Carriers were able to offer coverage during this time of need, and savings in risk-assessment costs even enabled their expansion to middle markets.
The future: Leveraging AI to further expand coverage
Automated underwriting continues to overtake full underwriting for most policies, and Bolduc envisions a future when IntelliScript can leverage “all valuable electronic data” to gain a truly complete medical history on an applicant.
“To ultimately offer more insurance to more people is highly dependent on finding new sources of data,” Rengachary says.
Artificial intelligence will be essential, as will other advanced analytics that aggregate real-time patient information. With these tools, insurers will be able to further save on risk assessment and ultimately offer coverage to more people, including those with serious health conditions.
“Across our actuaries, underwriters, clinicians, and technologists,” Bolduc says, “Milliman has the expertise to know the market, obtain the data, and build the tools to correctly assess risk, so insurers can make the right decisions and more people can get life insurance to protect their loved ones.”
This article was written by Milliman Senior Writer Adin Bookbinder.
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