ACCELERATED UNDERWRITING:

PEOPLE, PROCESS, PLATFORM, DATA, ANALYTICS, OR CUSTOMER EXPERIENCE?

WHITE PAPER

Sandeep ManchandaBusiness Head, Accelerated Underwriting Sandeep.Manchanda@exlservice.com

exl.insurance@exlservice.com

So which one is the key? Actually, they all are. And therein lies the challenge in realizing transformative benefits from an accelerated underwriting program. What’s more, the partner ecosystem that covers each of these areas works in its own silo creating a complex puzzle for carriers to unravel. In the end, a program’s ability to deliver benefits

boils down to two elements:

1. Foundation: Are all of the relevant factors —People, Process, Platform, Data, Analytics, andCustomer Experience — addressed in the redesignedaccelerated operating model?

2. Learning: Is there a learning methodology embeddedto continuously improve the process?

In 2016, SOA surveyed 27 carriers and found: 10 had an accelerated underwriting program in some form, 10 were still in the process, and 3 were evaluating1. So, what does this indicate for 2019?

• Rapid adoption of accelerated underwriting isin progress

• Analysts estimate over 80 accelerated underwritingproducts are available in the market today, withdozens more anticipated annually

• Over ten large insurers have a mature acceleratedunderwriting process capable of issuing significantface-value policies in as little as a few minutes.

ACCELERATED UNDERWRITING: PEOPLE, PROCESS, PLATFORM, DATA, ANALYTICS, OR CUSTOMER EXPERIENCE?

1 Source: Society of Actuaries 2016 Predictive Analytics and Accelerated & Enhanced Underwriting2 Source: Celent 2018, 2016, and 2007 New Business Benchmarking Studies

Metric  All Respondents 

High Face Value Writers 

Modest Face Value Writers

New business budget per insurance application received $269 (2018)  $487 (2018)  $196 (2018) 

$312 (2016)  $426 (2016)  $216 (2016) 

$461 (2007) 

New business budget per policy issued $372 (2018)  $677 (2018)  $270 (2018) 

$440 (2016)  $671 (2016)  $286 (2016) 

$1,058 (2007) 

Applications received per staff member 1,166 (2018)  236 (2018)  1,857 (2018) 

981 (2016)  526 (2016)  1,862 (2016) 

Policies issued per staff member 853 (2018)  163 (2018)  1,364 (2018) 

602 (2016)  445 (2016)  936 (2016) 

Percentage of budget devoted to staff 49% (2018)  49% (2018)  57% (2018) 

53% (2016)  53% (2016)  54% (2016) 

Percentage of budget devoted to requirements 37% (2018)  36% (2018)  22% (2018) 

38% (2016)  39% (2016)  35% (2016) 

Average new business cycle time for complex cases 33 (2018)  42 (2018)  26 (2018) 

38 (2016)  44 (2016)  33 (2016) 

KEY METRICS — 2018 VS. 2016 VS. 20072Table 1:

With over 700 carriers in the US, this paradigm shift has the potential to transform the industry. As with any major shift, there are likely to be a few bumps in the road. For example, a recently conducted Celent survey shows that despite significant improvements in cost and cycle time, few carriers have achieved transformative benefits. While incremental improvements are happening, as long as the staffing model remains largely unchanged, transformative benefits are unlikely to be achieved. From 2007 to 2018, many carriers implemented accelerated underwriting programs. During that same time, however, policies issued per staff member did not change substantially. In fact, as Table 1 shows, for high face-value carriers, the metric actually decreased substantially. It is also worth noting that in the same time period percent spend on staff saw little change.

Carriers may also face challenges in correctly segmenting applicant risk pools, for example, because of decreased fluid testing and a shorter question set. In order to address these issues, any successful accelerated underwriting program must include not only data, analytics, and technology, but also collaboration among marketing, distribution, underwriting, actuaries, and compliance.

With this as a guiding principle, the carrier can better work to address each of the six foundational factors as it moves towards accelerated underwriting:

1. People and time constraints arise as technologyimplementation, data collection, and modelingneeds to grow. Underwriter role expands tooperations management as well.

2. Process mapping and optimization is a keycapability needed to support customer experienceand straight-through processing goals.

3. Platform needs to be upgraded for attractive customer journeys, external data usage, automated rule-based underwriting, and decision analytics. The platform now becomes a collaborative data space among marketing, distribution, underwriting and actuarial functions.

4. Data assets need to be created from prior applications and in-force book. Modeling is needed at every step of the accelerated underwriting process to create predictive scores and learn from the results. External data used for pricing and risk selection is likely to follow FCRA regulations, necessitating a process for the consumer to review, contest, and amend the information used. Information management and security, with appropriate consents, need to be planned in advance.

5. Analytics becomes an important new discipline that needs to be added to the mix. Optimizing the data costs of external data & mortality scores and setting the portfolio thresholds is a continuous process—during underwriting and post-issue. Non-disclosures by applicants are more likely to go undetected in the absence of fluid testing; agents may be able to game the process with clear knowledge of thresholds.

6. Customer experience becomes the new key driver, requiring all customer touchpoints to be redesigned and measured.

Regardless of the paradigm, underwriting costs stem largely from underwriting reviews and requirements. Both of these elements sit directly in the bulls-eye for data-driven accelerated underwriting. Hence, the adoption of an automated platform also becomes a significant factor in improving cycle time and implementing a new accelerated underwriting process, as shown by research data collected by Celent.

“Any successful accelerated underwriting program is not only about data, analytics, and technology but also about collaboration among marketing,

distribution, underwriting, actuaries, and compliance.”

Adopting a holistic approach will help avoid some of the pitfalls of “missing a factor” when implementing an accelerated underwriting model. Here are a few sample pitfalls and ways to avoid them:

• Underwriter review times are up! More datacan lead to higher review times if the processconsiderations are missing. An important first stepcould be to assess the current process and “blueprint”the new accelerated underwriting process forlearning, efficiency, and speed.

• Very low volumes with no direct answers! Datascientists would need to get busy generating insightsrelated to customer targeting, experience, and riskratings. Is the team empowered with data frommarketing campaigns, web analytics, and digitizedapplications?

• Producers are avoiding it! Customer experience isan important design consideration and a potentiallyimportant differentiator. A truly effective process mustexceed the expectations of both the producers andthe end customers.

• Low straight through processing rates! Acceleratedproducts involve an underwriting philosophy changeimplemented using mortality scores and technology-driven rules. Developing a new business platformwith a customizable accelerated underwriting ruleset to change mortality score thresholds and automate complex decision rules can help hit the ground running.

Benefits from accelerated underwriting products will accrue over time. By adopting a holistic approach and keeping the focus on the foundation elements of the program, that time will be even shorter.

3 Source: Celent 2018 New Business Benchmarking Study

Cycle Time

KEY FINDINGS

• The application ofautomation to theunderwriting process hasa major impact on thecycle time. Overall cycletimes are reduced from32 days to 14 days.

• Cycle times continue to fallfor underwriting business.In 2007, the cycle time was52 days, compared to 38days in 2016 and 33 daysin 2018. This is a verypositive trend.

Here we see a comparison of manually underwritten policies and at least some automation. The difference is quite striking.

With automation, even the high face amount carriers turn around a case in under 24 days. Modest face amount carriers do so in right at 10 days.

Compare this to over 41 days and over 32 days respectively without automation. This does not even consider the improvements with data-based underwriting.

THE NEED FOR SPEED Cycle Time by Respondent Group — 2018; Some Automation3

© 2019 EXLSERVICE HOLDINGS INC. ALL RIGHTS RESERVED

Considering an accelerated underwriting program? Already heading in that direction? EXL is ready to help as a sounding board for ideas or to provide support for your accelerated product launch. Feel free to reach out directly to Sandeep Manchanda at +1-914-345-6735 or sandeep.manchanda@exlservice.com.

App to Home Office; HO to Review; Review to Received Requirements; Received Requirements to Decision Decision to Policy Issue; Policy Issue to Mail; Policy Received by Agent or Customer

Average Overall

High Face Amount Writers

Modest Face Amount Writers

0,7 1,2 1,0 4,04,610,00,6

0,9 1,1 1,0 3,01,71,60,7

0,7 1,0 1,1 3,34,40,7 2,8

0 days 10 days 20 days