A Swiss Re executive wrote an interesting article this month on the automation of life and health underwriting. The article sets out the expectations firms like Swiss Re have for automation, but is surprisingly quiet on the hurdles it still needs to address for those expectations to be realised.
John Turner is Swiss Re’s Underwriting Propositions Lead for its EMEA region. His article makes a good case for seeing automation as more than just ‘doing things more quickly’. And he goes on to explore the different ways in which “…automation can become truly game changing in the insurance onboarding process and beyond”.
There is however a debate to be had about how this is done. And yes, I know that some people will raise their eyebrows at the prospect of ‘more debate’, when they just want to get on with doing business. However, I believe that a pro-active debate now is better than a reactive argument later.
Why then is such a debate necessary? From the feedback I receive, trust has a lot to do with it. After all, we’re talking here about sensitive personal data. And also relevant is the essential nature of a sector like life insurance. Few can buy a house without it.
For the various digital innovations being prepared for life and health insurance at the moment, their success depends just as much on the public accepting them as on the sector accepting them. As an essential service, how life underwriting evolves is going to be a joint enterprise, not just an insurer one.
What I want to do now is look at various points that John raises in his article and look at them in another way, one that is a mix of pragmatism, challenge and support.
Let’s begin with this part…
“For instance, we have already begun using the same automation capabilities to assess not just what the customer can tell us, but also some of the additional evidence that may be available to us from other sources, such as laboratory reports.”
On the face of it, this makes sense, but dig a little and two issues emerge. The first is aggregation. This happens when disparate pieces of data are assembled together around an identify that the insurer holds on you. Consumers tend to be wary of this, on the basis that one may have declared data item X in circumstance A, but that doesn’t mean that it can be moved across to circumstance B and used there. Doing so raises issues around consent (I only consented to it for circumstance A) and identity (which I explore in detail here).
The second issue is this data as material fact. If the insurer assembles it without informing the consumer of this in full (and that’s generally the case), then it cannot stand as a material fact declared by the consumer. That's because data declared in one circumstance may mean something quite different if then used in another circumstance. If the way in which the insurer has interpreted it turns out to be wrong, then the insurer can’t hold this against the consumer. But how many insurers will work in this way, especially if the consumer doesn’t know where that data came from or how it was interpreted? It’s a minefield.
Access to Medical Records
“There are still some hurdles, as this is limited by a lack of standardisation of how this data is stored and presented. The addition of consistent electronic health records, a process that is still evolving, will be a massive step forward for insurers and their customers, while also saving the valuable time of the physicians who would no longer need to complete manual reports.”
At the moment, I see the hurdles around access to digital medical records as in the insurers’ court to address. Remember that the information in digital medical records is centred around the doctor / patient relationship, which is very different to that of insurer / policyholder. It is a relationship with many decades of debate about medical ethics, for which doctors receive a lot of training. I’m not sure that medical underwriters receive anything like that level of training in ethics, nor that the right standards are in place for achieve fairness and equality.
I have explored the issues around access to digital medical records in a detailed piece of analysis, which can be found here.
The Protection Gap
“Time savings are just one key element of the societal benefits of digitalisation, but a more efficient process also means more people can get insurance cover, thereby helping society further by helping close the protection gap.”
This is a promise often made for various forms of digital underwriting in the life and health sectors, but I would like to see more evidence of this. In particular, there needs to be a balanced picture of those who have been brought into the market, and those who the market no longer feels able to service. The sector has a tendency to focus on the former, but a lot of consumer groups are raising concerns about the latter. More research needs to be done on this, by independent experts.
Eliminating Price Shocks
“The first is a logical step already being undertaken by many, with existing digital databases containing huge amounts of risk-relevant information. Being able to leverage these at the point of sale, in addition to disclosures, has an obviously beneficial impact on the accuracy of the assessment made. Having a more accurate price quoted at point of sale, facilitated by such information, also helps to remove the price shock common in the traditional process as new risk information emerges during the underwriting process.”
I recognise the case for removing price shocks during the underwriting process, but wonder whether automation might in fact increase them rather than reduce them. After all, the personalisation that such data is being gathered for is more likely than not to increase price volatility. As a result, price shocks from automation could grow rather than lessen.
Real Time Underwriting
“Because such a step would benefit both insurer and customer, it holds huge potential. Regular manual assessments to monitor a person's health will never prove cost effective; consequently, this post-issue review of medical factors is an area where automation is almost a requirement to deliver the true benefits.”
To a lot of insurance people, this makes perfect sense, but the danger here is that post issue reviews is actually on-going underwriting of the risk. There are two problem here. Firstly, while that will help insurers identify health risks, it also means that those risks could push premiums up or cover down. The sector needs to be more transparent about the two way nature of this.
And secondly, identifying that there is a problem doesn’t mean that the problem will, in health terms, actually present itself. The medical world is much better at identifying that say, cancer is present, than determining whether it will have a detrimental effect on that person’s health.
Life and health underwriting is on a potential game changing journey into a digital landscape. As someone who has spent many years navigating mountains and caves, the success of a journey depends on being clear about not just the good bits, but the challenging bits as well. I like how Swiss Re, and John Turner in particular, has at times been willing to debate the issues such a journey presents. That debate needs to be continued, for it is now more important than ever.