Underwriting Engines

Hank George, FALU, CLU, FLMI

Just a year ago, one would have had comparatively little incentive to write this commentary…which is perhaps the best way of saying that our underwriting environment is now changing dramatically due to the confluence of a number of factors.

“Faster, cheaper, better” has been the mantra of life insurer senior management for years now where risk appraisal in concerned. This has propelled teleunderwriting into the forefront as our paradigm of choice and also fueled the embrace of rapid-acquisition assets like Rx profiles and MVRs in America.

Now, new challenges have arisen which are destined to drive the embrace of the best of the so-called “underwriting engines”…defined here as new business systems that use risk assessment information to take action on as many applications as possible; then, serve up the remainder to underwriters for resolution.

Which prevailing factors have pushed the engine approach into the spotlight?

• Recession-driven heightened priority of controlling business acquisition costs
• Widespread staffing reductions
• Evolving “super-simplified” products in the vast, underserved middle-market (where the traditional “fully-underwritten business” model no longer resonates…nor should it)
• (Potential for) excellence in underwriting engine design and function

It is no secret that North American deployment of underwriting engines has been, at best, sluggish. There are a number of reasons why they have not gained much traction. What is most important for now, however, is to understand how things have changed and what the implications of these changes are for the topography of risk appraisal.

One can conceptualize an “underwriting engine for all seasons.”

The question is: are we there yet?

As teleunderwriting science emerged, we made the blunt comment that “garbage in…garbage out” (and vice versa) should drive how teleinterview drilldown questions are developed, fine-tuned, deployed, audited and, ultimately, perfected.

This goes double, as they say, for underwriting engines.

The ideal North American underwriting engine must capture the highest level of medical underwriting expertise…because rules-mediated risk triage has profound implications for two equally-urgent outcomes: mortality/morbidity and maximizing sales (or, if you wish, minimizing avoidable wastage of good business).

One need not sacrifice one endpoint for the other; that is, if one uses the finest available knowledge base, unencumbered by other agendas.

The ideal American underwriting engine must include highly sophisticated Rx rules which extract every dollop of protective value from pharmacy profile reports. One hastens to add that the primacy of high-level Rx triage must also be keenly appreciated by those doing business outside America!

The ideal rules engine can only be realized if the risk assessment paradigms are populated with data from the best possible drilldown sequences. The most important questions – pursuant to and specific for each and every symptom and diagnosis – must be addressed, once again underscoring the fact that medical knowledge attuned to the context of risk appraisal is intrinsic to realizing the outcomes attainable in an engine-driven underwriting environment.

Opportunity awaits those insurers who follow one of two paths: working with experts to manufacture indigenous engines or shrewdly avail themselves of what is certain to be a growing number of provider products.

Our company welcomes inquiries from insurers as well as current and prospective life underwriting engine providers targeting the North American market.

This is what we bring to the table:

• Unique insight into Rx by virtue of having spent two years building the only underwriting-specific resource detailing what matters to risk appraisal about every drug used in the USA (and the vast majority used globally). We call it our Underwriting Guide to Rx and it is currently an online “browser-based” used by life and health insurers.
• The key to successful drilldowns is asking the right questions, phrased in an ideal manner for the interviewee. We have extensive experience designing drilldowns, honed through customizing sets for life, health and disability carriers as well as our own proprietary generic set of 96 drilldowns. These are readily adaptable for a super-simplified underwriting environment.
• Over 35 years devoted exclusively to acquiring and using medical knowledge in underwriting, taken to an unprecedented level by researching and writing wrote over 100 continuing education programs across all domains of medicine since 2003 (and continuing).
• An uncompromising commitment to excellence. Our reputation, at the end of the day, is what we have.

We currently work with SelectX, a British consulting firm with extensive hands-on experience with the development of underwriting rules.

It will be instructive to watch as the underwriting engine concept takes firm root in North America, as it has so successfully in the UK and other parts of the global underwriting community.

Considering what is at stake, one hopes it is held to the highest standards.