6 trends: The digital transformation of life and health underwriting
Life and health insurance buyers’ experiences in different areas of retail and services have raised the bar for insurers. Digital natives in particular expect slicker interaction, says Gareth Matthews, UK Chief Underwriter at Hannover Re.
The service expectations of people who buy insurance are changing fast. Life and health insurers are well aware that new underwriting technology will be a key growth driver in this dynamic environment. But where will they be concentrating their efforts in the coming years? Here are six big trends to watch.
#1 Greater availability of underwriting information tools
We are going to see a step-change in the availability of biometric underwriting data to life and health insurers over the next few years. Technology is fast becoming available that will help insurers conduct risk evaluation on prospective and existing clients in real time, without the need for nurses and/or fluid samples.
Patented transdermal optical imaging (TOI) technology, for example, uses a conventional video camera to extract blood flow information from the image of the face, facilitating more than 30 medical-grade health and wellness measurements. Such applications will slash the cost of policy underwriting and contribute to fraud reduction when used in conjunction with questionnaires.
#2 Faster advances in automated underwriting
Automated underwriting, where advanced analytical modelling, natural language processing and document imaging tools are used in new and existing business processes, promises big cost savings to carriers. At the same time, automation also enhances customers’ experience of buying and managing their life and health cover.
By lowering the barriers to entry and instantly offering discounts or extras based on answers, for example, carriers will boost conversion rates. Increasingly sophisticated wearable technology, including smartwatches, fitness trackers and garments with integrated sensors that collect data by measuring variables such as step count, heart rate and sleep habits, has growing appeal for risk conscious clients.
#3 Fraud detection will shift up a gear in the face of threats
Life and health insurers will rise to the challenge posed by tech-savvy fraudsters, often operating as part of well-resourced organised crime groups. And the threat of fraud is spiralling, with data breaches becoming increasingly frequent and severe across the wider economy.
At point of sale as well as in claim management, insurers will require new tools to save time and minimise costs resulting from ID theft, manipulated documents or fake employment details. AI-powered automated digital, visual and content analysis tools will increasingly be deployed to examine document metadata indicators. Biometric and predictive behavioural analytics will also have a bigger role to play.
#4 Behavioural science applications will be introduced along the value chain
Life and health insurers are currently scratching the surface of what behavioural science could bring to issues such as underinsurance, inaccurate disclosures and unhealthy lifestyles. Behavioural science explores the insights into the subconscious biases that influence a person’s decision-making.
For insurers, those decision are to do with marketing, onboarding and claim management, for example. Using real-time machine learning to analyse how a policyholder or applicant behaves while interacting digitally enables an insurer to understand and predict their intent.
#5 Some markets will adopt (and adapt to) digitalisation faster than others
One potential barrier to widespread use of new techniques such as behavioural economics and AI is that the various country regulators each have their own approach to emerging technology.
Life and health insurers will need to be aware of how individual markets regulate aspects of AI, big data, privacy and cyber risk in relation to their exploitation of digital technology across the value chain. EIOPA (the European Insurance & Occupational Authority), for example, believes that the digitalisation of insurance will increase the need for a stronger supervisory focus on both prudential and conduct, product oversight and governance, and value for money issues.
#6 The insurance industry’s response to a talent shortage in the digital arena
A big problem for life and health insurance companies is that their customers are more highly evolved digitally than their own businesses. In fact, the industry is facing a talent shortage. Specifically, while successful insurers understand the business and operational benefits that will accrue from digitalisation, their organisations lack the necessary skillsets.
Insurtechs are bringing innovative ideas and people into insurance but incumbent insurers have struggled to attract talent equipped with the appropriate transformational abilities and tech knowhow.
To compete for talent, not least with other parts of the financial services sector, life and health insurers now recognise the need to re-imagine their ‘recruit and retain’ initiatives.