Groceries, books, plane tickets, even automobiles: Most things we want to buy in today’s world can be delivered in a day or two via a few clicks on a mobile app. This is also true when it comes to buying some types of insurance, like auto or home insurance. Life insurance, however, is a different story. While customers are willing to pay, the life insurance buying process can be slow, nontransparent and lacking in self-service options, leading to high attrition and frustration for both customers and agents.

While some life insurers are trying to ease the purchase of certain types of policies with newer, non-invasive and accelerated underwriting models, they often end up with traditional underwriting processes, which bog down policy issuing. This is particularly true when it comes to larger policies for older applicants – ironically the ones producing the largest premiums.  In these cases, pressure from producers (agents, brokers, etc.) can be extremely high to expedite policy issuance in order to keep the sale.

Tackling the Main Source of Delay: The APS

The core challenge of the traditional underwriting process in life insurance is that it centers on the “attending physician’s statement” (APS).  Simply put, the APS is a comprehensive record of the proposed insured’s medical history. The historic model for obtaining an APS encompasses numerous manual and non-digital steps, making it time-consuming and costly. So while the APS is unquestionably one of the most powerful underwriting tools, it’s also the main source of delays.  On occasion, it may take weeks or months to obtain records.

The APS can include tens, hundreds, even thousands of pages of consultations, tests and evaluations, all of which need to be carefully reviewed by an underwriter. The underwriter is responsible for assessing the risk components from all this data and rendering a decision on the applicant’s insurability.

Because underwriters are one of the highest value resources for any life insurance company – as they make critical decisions that impact both the top and bottom lines – the clerical processes surrounding the APS review are not a good use of their time or skills; they’re paid for the analytical talents they bring to bear on risk selection decisions.

The equation is simple: Reducing the time an underwriter spends reviewing an APS speeds decision making. Multiply this by thousands and thousands of case reviews, and the aggregate reduction in effort can be significant.

Building a Digital Bridge

Providing underwriters with access to medical data in a digital format (i.e., via an electronic health record or EHR) would seem to be the ultimate solution; however, the scale, access, quality and comprehensiveness of the data needs to improve. While the healthcare industry has made significant strides to address the problem of secure digital medical data capture and exchange via EHRs, the necessary policy, compliance and technical infrastructure to make these records available to insurers outside the health insurance space are only now being considered.

Given the fragmented nature of the EHR industry and the variety of standards on the electronic health data side, building these “digital bridges” for at-scale operations will take some time. The quality and completeness of the data also needs to improve, which is another factor influencing EHR adoption. So until insurers adapt to a world in which APS records eventually will be retrieved electronically, there’s an urgent need to look for digital efficiency gains in the interim.  

What to Do in the Meantime to Expedite APS Review

It’s in an insurer’s best interest to explore other innovative solutions to help expedite the underwriting process. With the volumes of information that underwriters review, any assistance in identifying critically important risk indicators can be vital. Initiatives to introduce any level of highlighting, preassessment or triaging to this process can eliminate wasted time and give back to underwriters more critical – and fulfilling – “braintime.”

Here are a few actions we’ve seen carriers and underwriters take to improve and expedite current processes:

  • Substitute complete APS documents with patient-provided information. Techniques for doing so include:
    • Drill-down application questions: A set of questions for applicants to answer during the application process.
    • A point-of-sale or physician questionnaire to gather health-related risk information.
    • Tele-underwriting: A recorded interview with the applicant to gather health-related risk information.
  • Relax certain requirements and guidelines. Some insurers waive the need for an APS based on the age of the applicant and the dollar amount of the insurance coverage requested.
  • Engage an APS summarization service to reduce review time. While APS summaries do reduce underwriters’ review time, they’re typically done manually, are time-consuming and error-prone, don’t lend well to automation and aren’t scalable. Moreover, although underwriters don’t need to read full APS documents, they still end up reviewing several pages of APS summaries.

While all three of these steps can and have helped, they can also increase expenses or impact mortality assumptions. Insurers need to weigh the cost of these efforts against the cost of the current burden on underwriters and, perhaps worse, lost policy sales.

In our next blog, we’ll explore the challenges that accompany these alternatives and then describe how modern technology might be leveraged to help in new and more effective ways.

Tom McCarthy, Underwriting Consultant for Cognizant Risk Profile Gateway, and Sreenivas Rangamani, Venture Lead Product Manager for Cognizant Risk Profile Gateway, contributed to this blog.

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Chandan Gokhale

Chandan Gokhale

Chandan Gokhale is Startup Leader of Cognizant Risk Profile Gateway, a Cognizant Accelerator Venture. His focus is on building a clinical health data clearinghouse... Read more