Alternate data to drive more underwriting decisions

Industry report says COVID-19 pandemic has intensified life insurers’ use of AI-based risk assessments

Alternate data to drive more underwriting decisions

As the COVID-19 pandemic pushes entire industries to embrace digitization, more life insurers are being pushed to innovate with alternate data-driven underwriting techniques that use AI models.

In its Top Trends in Life Insurance: 2021 report, Capgemini noted that even prior to the COVID-19 pandemic, alternate data-powered underwriting had been gaining ground among life insurance carriers.

“Invasive medical testing often turns off life insurance applicants and leads them to shy away from in-person medical exams,” the report said. “The use of alternate data enables life insurers to evaluate risks over time for continuous underwriting.”

With limitations in place for non-essential medical treatments and face-to-face meetings, underwriting processes that don’t rely on physically collected samples have become more appealing. At the same time, consumer interest in life insurance has risen because of the pandemic; in a Capgemini COVID-19 consumer survey conducted in April 2020, respondents expected life insurance purchases to increase from 32% to 41% within six to nine months.

“Post COVID-19 outbreak the use of no paramedical exam or at-home self-testing has increased,” Capgemini said. To support the shift away from in-person medical exams, life insurers are leaning more on alternate date gleaned from electronic health records and other databases, as well as advancements in artificial intelligence and machine learning.

Life insurance carriers, the report said, are deploying AI-based systems to produce insights from EHRs, prescription databases, and historical claims reports to speed up underwriting decisions. In the U.S., those include John Hancock, which partnered with insurtech Human API to obtain real-time access to applicants’ electronic health records; and Haven Life, a subsidiary of Mass Mutual, which runs applicants’ historical lab results and medical claims data through AI algorithms to generate coverage quotes instantly without in person-medical exams.

“Life insurers that use alternate data for continuous underwriting can assess applicant risk more efficiently, leading to an expanded role in policyholders’ lives - from payer to partner and preventer,” the report said.