Digitisation in life and health insurance in the era of Covid 19
How Automated Underwriting generates more business at lower cost
COVID-19 has accelerated digitalisation in many areas. Automated underwriting in life insurance both fosters growth for primary insurers and enhances the customer experience. To learn more, join a discussion featuring experts from Munich Re, Madrid: Esteban Alburquerque, Head of Life and Health; Carlos Rodríguez, Head of Underwriting and Innovation in Life and Health; and Ricardo Daura, Project Manager Automated Solutions.
Esteban: It has been a hectic few months for the insurance industry. The impact of Covid-19 has significantly changed work schedules and priorities. In this volatile and changing environment, it is admirable how the insurance industry has been able to respond on different fronts while maintaining client contact and business operations. At the same time, the new reality forces us to question strategic guidelines and implement measures for the future earlier than planned. Especially in view of the accelerated change we have been experiencing in certain areas in recent months. It is clear that the outbreak of the pandemic and the consequences of the containment measures are accelerating some trends that were already apparent before. First and foremost in the area of automation and digitalization. It is no longer a question of whether or not to ride the wave of change, but when and with which partners. The general consensus is: the earlier, the better.
In this respect, Carlos, how do you perceive the accelerated digitization in the insurance sector?
Carlos: Digitization has been a necessity and a high priority in the insurance industry for some years now. Our customers have made great efforts to make their systems ready to compete in the new digital economy even before Covid-19. But it was only with the pandemic and the containment measures that we all realized how important it is for potential policyholders to be able to communicate, get advice and conclude contracts digitally. Companies that already have a purely digital sales and customer relationship infrastructure will have become more proficient in recent weeks in terms of lead generation and new business underwriting. And it is precisely these experiences that customers make in extraordinary times like these that will influence further current and future purchasing decisions.
A special situation arose in the life and health sector that made us think: While awareness for and also the intention to buy life insurance increased in the population during the pandemic (according to a study, up to 39% of those surveyed stated that they would like to purchase life insurance after the pandemic), the actual number of new policies decreased significantly. This is mainly due to two factors: Firstly, very few insurers had digitalised the entire process of taking out life insurance policies. The second difficulty was to underwrite such risks without medical examination. The rigidity of the underwriting processes, in many cases still documented on paper, also prevented rapid adaptation to the new requirements (and applicants) during Covid-19. We strongly believe that the current circumstances offer the opportunity to push digitalization and automation in the industry at full speed and pave the way for the future. A future that is already dawning and more volatile, uncertain, complex and diverse than ever before.
Esteban: But, how can you compensate for the loss of distribution and sales capacity and continue to generate new leads and adapt underwriting processes flexibly and consistently, regardless of current circumstances? At Munich Re, we already have extensive experience in developing solutions designed to improve the customer experience and help making the life insurance sales process more efficient. We pioneered the initiation and development of tele-underwriting more than 10 years ago. Now we are focusing our efforts on the next wave of transformation towards automated underwriting.
How can this be achieved, Ricardo, and what is changing from the current process?
Ricardo: Focusing on our Southern Europe and Latin America region, we have developed the Automated Underwriting solution SARA (Simplified Automated Risk Assessment). SARA has enabled us to combine our medical underwriting capabilities with our expertise in the development of digital processes. SARA is the ultimate solution for automated underwriting. Why? Because SARA is completely digital! Today's client has already acquired buying and contracting habits for digital services using powerful contemporary platforms that were unthinkable a few years ago. This paradigm shift has intensified during the lock-down of the last few months - there is no turning back. SARA is used in both traditional and digital channels. Because it is a cloud application, it offers significant advantages in terms of implementation and maintenance. Simple and without interfering with the companies' existing system architecture.
Dynamic health questionnaires enable real-time pricing while maintaining maximum discipline in risk selection. All this is based on our global underwriting manual MIRA. This makes the entire process more efficient and agile. Pricing is generated using a powerful online price calculator, which enables the primary insurer to immediately provide each applicant with the calculated premium. And this is done without interrupting the process for health checks or manual risk analysis, thereby jeopardizing the conclusion of the contract.
Esteban: What are the benefits of this solution and what results do we see in the projects already underway?
Ricardo: The benefits are really immediate and have a clear impact on the business. Basically, the closing rate increases by more than 90%, thanks to the elimination of interruptions during the contract process. This is reinforced by an increase in the average sum insured, motivated by the immediacy of the process and by higher sums insured. Finally, thanks to the use of dynamic and parameterised questionnaires, better quality in underwriting is achieved, which has a direct impact on a lower failure rate compared to static questionnaires with "yes or no" answers.
Esteban: This is a significant leap in underwriting quality and an improvement of the portfolio compared to current processes. It also allows for more advanced data management, which is of absolute strategic importance.
Carlos: For Munich Re, data is a key element of our strategy. Without data analytics, we would not be able to improve our underwriting rules, our products or our actuarial models, among other things. Data processing, made possible by our automatic underwriting tools, helps us to identify trends in certain diseases and even to find out whether a single question is confusing for applicants. In this way, we improve the customer experience. Our Automated Underwriting clients are provided with a dashboard that presents the most important information from their underwriting process in an easily understandable way, which in turn facilitates the analysis and monitoring of key indicators.
Looking to the future, one of the most interesting objectives for life and health insurance is to be able to perform predictive analytics. Without data, however, this becomes an impossible endeavour - without a solid foundation. At this point, we can make further improvements in order to further develop the questionnaires and strengthen their predictive power with the data generated by SARA.
And that is not all. Automating underwriting is only part of the process. We are expanding our focus on claims management to make this more agile, efficient and intelligent for our clients as well. By bringing together the underwriting and claims processes, the new insights will enable us to tailor our products to the needs of each client and make insurance purchasing and claims settlement more consumer-friendly.
Esteban: We focus on concrete solutions that are tangible for our clients and can be easily implemented in existing processes and systems. We believe that digitalization is the key to simplifying processes and improving the customer experience. To achieve this, we put our skills, knowledge and technology at the service of our customers. If current reality teaches us anything, it is that now is the time to accelerate change. At Munich Re, we are happy to accompany you in this process.