What's ahead for life insurance underwriting?

If you’ve tried to purchase life insurance and been turned off by the lengthy analog process, I don’t blame you. Removing barriers to coverage is why we’ve worked so hard to bring this essential product into the 21st century with an all-digital platform. 

One of the most exhilarating parts of that innovation journey has been underwriting. Underwriting depends on data, and data—how we source it, how we analyze it, and how we use it—is evolving at an exponential pace. With things moving so fast it’s important to pause to acknowledge how far the industry has come, and ponder where it might be going. 

The initial phase
Underwriting—the concept of which goes back many centuries—began to slowly evolve in the 20th century, with additional health and risk classes added beyond the initial one of age. The smoker/non-smoker designation that appeared in the ’70s, along with advancements in blood drawing in the ’80s, provided a more accurate risk assessment. But the administration of underwriting still included in-person appointments and hand-written paperwork, with a hefty price tag for labor costs and lab testing. 

In short, it was viewed by many as an unbeloved process and the act of applying was seen by these folks as a lengthy and laborious chore. Despite consumers’ perspective on the underwriting process,  it stayed relatively unchanged during the 20th century, perhaps because there was no real incentive to change it.   

A digital awakening
One of the hallmarks of the 21st century is getting anything you want instantly and online, whether that be banking or getting approved for a loan. Life insurance is now also available instantly and online. 

But not all digital underwriting is equal. The launch of “simplified issue” products enabled a more desirable front-end experience, but those have come at a cost for the consumer—quite literally. The lower resolution of the underwriting carries more risk, which translates to higher premiums.

Next-gen digital underwriting uses digital data sources and sophisticated rules to enable instant offers at a fully underwritten price—resolving the trade-off between convenience and price. It requires laying significant groundwork in the way the product is architected and diligent, careful audits to ensure the continuous quality of underwriting. 

The next frontier
If we consider how revolutionary the introduction of smoking classes was in the ’70s, we can appreciate how much new scientific research will impact underwriting in the coming years. Take, for example, recent efforts to study how sitting might be the new smoking. Now imagine combining these discoveries with the proliferation of healthtech data.

Wearables like Apple Watches and Fitbits are already ubiquitous. Stats such as steps and sitting hours are now ingrained in our everyday lives. The ability to collect, understand, and use data responsibly in the future holds great promise. What if underwriting was more of a series of snapshots over time? How would that change the process to the benefit of the consumer?

By understanding a policyholder’s personal data better, insurers will eventually be able to recommend reactive and preventative actions that can extend lifespan, improve quality of life and health, and save the customer money. That could mean that, when combined with medical advances, something like a digital insulin monitor could not only reduce a diabetic’s risk but also reduce the cost of their life insurance premiums dramatically. Underwriting, and therefore life insurance companies, could eventually become partners in longevity.

Whatever the future of underwriting holds, it will depend on the evolution of technology and data—which is why it’s so important for incumbents to accelerate their digital transformations and for insurtechs to maintain their digital edge. Traveling into the unknown has never been more exciting.