Accelerated underwriting in life insurance: what examiners need to know.

Life insurance underwriting has historically been a manual and sometimes tedious process. The process has involved collecting evidence of insurability during the application process to assess the mortality risks of individual applicants. The two largest pieces of evidence have been paramedical exams, with collection of vital signs (build, blood pressure, etc.) and fluids for testing, and attending physician statements particularly for cases with large face amounts and/or older issue ages. There has been a shift in recent years to accelerated underwriting (AUW) programs, in which underwriting requirements are waived for certain applicants. These AUW programs are typically limited to certain issue ages and/or face amounts and enable only a portion of those eligible to qualify without traditional underwriting requirements. According to the SOA 2019 Survey, most companies currently limit the application of accelerated underwriting to term life insurance policies with a face amount between $100,000 and $1 million and applicants between the age of 18 and 60. The COVID-19 pandemic sped up the adoption of AUW in the industry as both consumers and insurers looked for options to purchase and write policies that relied more on technology and involved less in-person contact. The increasing use of AUW, poses new risks and considerations for regulators, examiners, and insurers.

What is accelerated underwriting?

The definition of AUW, per the VM-20 Underwriting Definitions Sub-group, is “a process to replace traditional underwriting and allow some applicants to have certain medical requirements (such as paramedical exams and fluid collection) waived. The process generally uses predicative models or machine learning algorithms to analyze data pertaining to the applicant, which includes both traditional and non-traditional underwriting data that comes from both the applicant and external sources.” A more palatable definition is that AUW is a process that is making it faster and easier for people with good health and good credit to obtain life insurance. With AUW, these applicants can typically get a term life insurance policy without a medical exam. Per the NAIC, “As consumers increasingly expect on-demand digital services, some insurers are able to use AUW to replace paramedical examinations with data from external sources along with new analytics and modeling techniques."