The future of Life and Health Underwriting
Updated: Mar 29
At the start of 2017, there were 526 million connected wearable devices around the globe a figure that is expected to rise to 1.1 billion by 2022 (1). At the same time, Swiss Re (2) has estimated that the global life insurance industry has premiums of $2.6 trillion. So the potential for interaction between the wearable and mobile technology revolution and life and health companies will see the coming together of some extraordinary numbers.
However, as we all know this technological revolution promises a lot more than just data points. Life and health insurers and their customers will mutually benefit from the focus on reducing morbidity and mortality advanced by the precise knowledge of medical risks.
This more positive relationship between the underwriter and insured, will not, however, solve many of the challenges the life and health market faces. These include the need to reduce its cost base, whilst measuring up to the complex and demanding regulatory environment it is subject - whilst not losing sight of the importance of improving profitability.
Undoubtedly the development of digital data that can be leveraged by the life and health sector is a vital step forward in these efforts. However, the use of this data will only bring real benefits when combined with credible algorithms, trained on large population data sets, that actuarial science can recognise and use to lead underwriting decision making and pricing.
But how can we underwrite better today and why should we invest in newer methods? Today’s life and health businesses have evolved a twin-track health assessment system for underwriting.
The first has the benefits of being relatively quick, and it’s certainly cheap as customers have to fill in their own questionnaire - effectively doing their own health assessment. In some cases, additional costs are incurred as it may need to be reviewed by a human being. The significant downside is that these self-assessments often lead to inaccurate or inconclusive data and are frequently subject to re-underwriting and further costs.
The second approach which uses one-to-one medically led health checks deals with the accuracy problem but is expensive to deliver and takes time, not just to perform, but to set up and plan - often not the preferred approach of younger consumers used to instant digital responses.
Having said that, improvements in the sector are emerging:
Each one of us collects a mass of digital data, which provides a record of health and lifestyle markers over time. Combining this data with access to a comparable, big data set, which is the backbone of actuarial life underwriting and we can replace the laborious self or medical assessments we currently use and make a fundamental change to the underwriting process.
Naturally, you need convincing big data to achieve this. HealthyHealth uses exclusive data from over 1 million individuals for our digital assessments. This allows us to accurately predict the risk for diagnosis and mortality for over 800 medical conditions in just a few minutes.
With big data, combined with comprehensive individual information digitally delivered, the three components of the life and health underwriting process can be optimised. So it becomes fast, cheap and highly accurate.
There is no doubt that the life and health sector genuinely wants to be more responsive to the needs of customers and we can all welcome a shift that promotes health preservation and disease avoidance rather than simply mitigating the financial impact of death on loved ones.
By providing digital data as part of the underwriting process, the insurance industry is building trust with its clients, as consumers take greater control of their health. However, the real prize will come when insurers are able to use the relationship they have built with their clients to achieve better, more accurate underwriting decisions in a more efficient and cost-effective manner.
In my next blog, I’ll be looking at how we can give the consumer confidence that their data will be protected.
Luca Schnettler is the CEO of HealthyHealth