Half of life insurers in Canada and the U.S. have adopted automated underwriting, and many other companies are planning to take this approach in order to accelerate the process of issuing policies, according to new research from Windsor, Conn.-based global insurance association LIMRA.
In a recent study, LIMRA found that insurers are realizing a variety of benefits from automated underwriting, which involves tapping into data and technology to perform the applicant screening functions traditionally completed by underwriters.
Approximately three-quarters of companies that have implemented automated underwriting reported that the systems have helped to reduce the amount of time it takes to issue a policy.
Automated underwriting has also reduced costs associated with issuing policies for 59% of companies with these systems, and has helped to achieve scalability for half of those companies.
LIMRA projects that automated underwriting will continue to grow as new technologies and data tools emerge, and as companies face pressure from consumers who expect life insurance policies to be issued more quickly.
Of the companies involved in the study, 41% said they are planning to implement automated underwriting.
However, there are challenges associated with taking this approach. The three most common challenges of adopting automated underwriting, according to LIMRA, include having adequate human resources, working with legacy systems and the need to continually update algorithms.
The most popular source of information that insurance companies are using to facilitate automated underwriting is the Medical Information Bureau, known now as MIB Group Inc., which is being used by 94% of companies studied by LIMRA.
Seven in 10 insurers reported that they access prescription drug databases and motor vehicle records for information about applicants. Other common sources of data include laboratory results, credit records, criminal records and third-party service providers such as Seattle-based Milliman, Inc., LexisNexis Risk Solutions and InstantID.
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