Artificial intelligence (AI) is bringing about sweeping change to the world of underwriting.
And it is clear that the use of technology is resulting in improved processes and quicker decisions for some customers.
But grey areas mean the tech is augmenting work carried out by humans amid a shortfall of claims assessors.
Advisers appear divided over whether underwriting processes are improving or slowing down.
Indeed, one adviser has told Health & Protection he does not think the Consumer Duty has brought about the change he expected to see in customer journeys when going through underwriting.
And with improved protection sales expected as interest rates start to fall, it seems pressure on underwriting departments is only likely to increase in future.
Big push to automated technology
“We are seeing a big push towards using data and automated technology to improve underwriting performance and processes,” Steve Baldry, director, underwriting, at UnderwriteMe tells Health & Protection, who explains there are several benefits for customers with using automated underwriting tools.
“Firstly, they can help to speed up the underwriting process, which can lead to a much-improved customer experience,” Baldry continues.
“Secondly, they can improve the accuracy of underwriting decisions by providing underwriters with a more complete picture of the risk involved, making for a more personalised experience.
“For insurers, automation is helping to reduce business costs by automating day-to-day tasks that would otherwise be performed by humans.”
And Jacqueline Durbin, global head of product ‑ life, pensions and mortgages at Iress, maintains AI and machine learning looks set to further transform underwriting in the future – “From automating routine tasks to analysing vast amounts of data, to identifying risk patterns and making more accurate underwriting decisions.
“Alongside utilising data intelligence including real time data, this promises to help providers further personalise policies and pricing based on individual risk profiles.
“Digital tools and AI have the potential to streamline the customer journey, from application to claims processing, reducing wait times and improving overall satisfaction.
“Overall, with providers embracing AI, data and technology, these advancements are set to make underwriting more efficient, accurate and customer friendly, while enabling better risk management and more personalised products.”
Jon Finley, business development director at IPipeline, explains his firm has been working on introducing technologies that help determine underwriting results right at the start to reduce unpredictability and volatility on cost, process and terms – while better supporting vulnerable clients.
“This aims to help more advisers get more people protected,” Finley says.
“A smoother, more transparent underwriting and buying process will create more confidence in protection, in a market where confidence and trust are key.
“We are also integrating external data sources like IoT devices, health apps, and electronic health records to refine data collection for the providers our technology powers aiding and streamlining decision-making in underwriting.”
Increase in digital GP reports
But AI is not the only tool at insurer’s disposal in improving customer experience.
Scott Cadger, head of underwriting strategy and claims at Scottish Widows, says more GP surgeries post-Covid are responding to GP report requests digitally and the insurer is now seeing over 50% returned electronically and this has doubled since it was first introduced.
“There is still more to do to improve both return rates and speed of return, but this is significant progress,” Cadger says.
“We’re also seeing investment in how to manage other medical information from screenings in a digital format.
“Being able to play these back through rules engines on receipt allows for a speedier outcome and frees up underwriters to consider the more complex cases.”
Technology transforming underwriting processes
John Downes, underwriting and claims director at Vitality, maintains technology has continued to transform the underwriting process.
“Earlier this year we deployed software that provides GPs with technology that better supports them to provide medical reports, making the process quicker and easier.
“Further advances in medicine and a better understanding of disease also continually change how we assess and underwrite people.
“Automated underwriting has already transformed the underwriting process, with around 70% of our applications of protection policies going through this process,” he adds.
“Further scaling of automation, will further improve risk frameworks and how we underwrite people, accelerating the journey and onboarding for many more customers. Data science and AI will also further improve efficiencies, with the potential for insurers to better identify patterns, categorise clients into specific groups, and accurately assess their risk factors, in particular.”
For Sue Seymour, chief underwriter at Cirencester Friendly, it has been a case of embracing the benefits new technology offers and increasing automation where it works best for members.
“This has led us to review our questions to make sure they are as clear as possible, making them easier to answer and giving us better information to work with in return,” Seymour says.
“We have also reviewed our BMI limits, adopting an age-relevant approach to increase both fairness and accessibility.
“Similarly, we’ve reviewed our Automatic Medical Evidence limits, concentrating on getting them from applicants that most warrant screening based on their medical history.”
Empathetic underwriting
For British Friendly, the focus has been developing its underwriting in the last year to make it more empathetic, improve access to insurance and make applying for insurance easier.
“One area we’ve taken a more empathetic approach is around mental health and loss reactions,” the insurer tells Health & Protection.
“If applicants have needed short-term support or time off work after dealing with a significant life event such as a bereavement or relationship breakdown, we’ve developed underwriting guidelines for a more empathetic and flexible approach to offer standard rates to many applicants that historically may have received a mental health exclusion.
“We’ve changed our stance for applicants with a very high body mass index who may have found it hard to obtain income protection.
“By now considering applicants holistically and taking into their individual cardiovascular risk profile, including other factors like age, smoking and blood pressure, we can offer terms to more customers that previously may have been refused insurance due to body mass index alone.
“We’ve also made the process of applying for insurance easier by removing all automatic medical evidence for customers under age 42, regardless of the benefit amount when they select age-costed premiums.”
Grey areas
But for Lilla Dilliway, managing director at ClientTree Group, a key consideration are the grey areas underwriters come across.
“Risk assessment is normally data-driven which AI can be very good at,” Dilliway says.
“Seeing a set of individual circumstances as well as related statistics and then drawing conclusions based on a set of guidelines is a job for AI.
“However, things are rarely black and white. How can technology account for subjective grey aspects?
“Then again, should we consider the grey element or should we just rely on statistics?
“How subjective is underwriting today and how different is the outcome when a client’s situation is presented to different underwriters and AI?
“I don’t have these answers but I’d be surprised if this angle hasn’t been covered by now as our future health depends on it.”
AI not without risk
And AI is not without risk, according to Rebecca Robinson, director at Home Group Financial.
“We can recognise AI may help prevent fraud, but automated recommendation from decision-support predictive analytic tools do need to continue to develop to fully trust the technology,” Robinson says.
“AI and data can make it more efficient and in some cases it can enhance the customer experience, but it could be considered as a risk compared with the traditional concept of risk pooling.”
Lacking common sense
For Joanna Streames, owner of Velvet Mortgage and Insure Services, while underwriting processes have improved, common sense is lacking in systems.
“Underwriting has improved to give more decisions at app stage however, there is still often a lack of a common sense approach and there can be wide differences,” Streames says.
“We recently had a chap with the BRCA 2 gene who has an extra 2% chance of the cancer but is monitored yearly, never had any symptoms or problems other than knowing the gene was in his family history.
“Most providers underwrote this without any further evidence as this can’t be held against the person whilst another provider wanted a GPR. We have also had the client recently declined for global treatment.
“So it is very varied still in approach for certain things as this demonstrates.”
Secondary health data restrictions
Another further issue is the wider implications of EU legislation finalised earlier this year containing an explicit ban on the use of secondary health data for insurance purposes.
Such secondary data is characterised as being collected by someone else for some other purpose, which is then reused in another context, as opposed to primary data which is provided directly from the end customer.
Daniel Lloyd-John, CEO at Broadway Insurance, tells Health & Protection: “Our view if we are going to govern safely as client and customer’s experience in the front end of this process before data’s even got to an insurer, then I think it’s really important that the regulation of health data once it’s landed with insurers and underwriters is right at the top of the tree.
“So we are focused on the influence of data and analytics on insurance products and services and the implications this could have on the future of insurers.
“I think insurers and advisers who operate internationally are going to have steer through increased regulations relating to health data and I think a ban on the purchase and use of secondary health data as an underwriting and selling tool is probably a good thing.
“I know it will affect underwriting and actuarial capabilities internally but we have to put the customer at the heart of everything and I think if we don’t do that, then there’s a bigger privacy issue towards the ethical nature of health and protection solutions.”
Negligible impact of Consumer Duty
But this EU legislation is not the only set of rules the sector has been grappling with. Though Andrew Wilkinson, director at Moneysworth, believes the impact of the Financial Conduct Authority’s flagship Consumer Duty on underwriting consumer journeys has been negligible.
“First pre application choice has decreased, research takes longer and customer journey lengths have not improved,” Wilkinson says.
“Underwriting rule changes that lead to a higher number of number of good outcomes for consumers would mostly be around HIV and there are a few green shoots here and there, but overall we have seen no where near the changes we expected to see as a result of the new Consumer Duty and underwriting rules philosophies are still leading to bad outcomes for many consumers.
“Post application we are still seeing some very long customer journeys which increase the risk of cases not crossing the line to the detriment of clients and advisers.
“Electronic GPRs have helped and so has the willingness of some insurers to consider medical evidence provided by the applicant as a substitute for say a targeted GPR. But more and more GP surgeries are really struggling and some are choosing not to prioritise returning GPRs.”
Turning one problem into two
And adding a further spoke in the wheels are the shortfall in claims assessors and the prospect of growing demand for protection cover as sales pick up, says Alan Lakey, director at Highclere Financial Services.
“There appears to be a substantial shortfall of available assessors with many insurers using outside assistance – temps and experts in other fields drafted in,” Lakey says.
“I imagine many have been switched from underwriting to claims assessing which may have turned one problem into two.
“With interest rates primed to fall, and an assumption that this drives an increase in mortgages and associated protection, this augurs badly for underwriting departments.”