A presentation at a recent underwriting gathering was billed as being focused on the use of predictive analytics in contexts other than risk appraisal.
Feedback from several attendees suggests it was just the opposite, centered largely on their deployment in underwriting.
So much for the verisimilitude of at least some session descriptions!
Fact is, insurers are presently being inundated with risk screening options no one would have imagined possible a decade ago. The developers of some of these tools are aggressively promoting their deployment in the underwriting process.
Most carriers lack the internal resources necessary to fully determine the pros and cons of these risk selection assets. In the face of cacophonous hype amped up by promoters of certain underwriting resource wannabes, direct writers need reinsurer research and guidance more than ever before.
Industry presentations are literally awash in glowing (and notably vague) prognostications regarding the “inevitable” impact of predictive analytics for assessing insurability. Much of this emanates from senior executives who are largely unfamiliar with the underwriting process, and as well as from those who stand to profit from the embrace of their models.
If insurers adopt these putative enhancements, will they unwittingly walk away from proven risk assessment strategies simply to (further) trim out-of-pocket acquisition costs?
Furthermore, what are the worrisome downstream implications if they proceed in this manner?
Over the last two decades, reinsurers have taken the lead in vetting new underwriting resources and on many occasions given insurers the equivalent of a green light in this context.
Automatically ceded business is a primary source of revenue for all reinsurers. Because they put these cases on the books without the opportunity to assess their insurability, reinsurers have a vested interest in how their clients screen life insurance applicants.
Their “thumbs up” endorsement of teleinterviews as a more bountiful approach to taking applicants’ risk histories was a major driver of today’s widespread use of this ideal information gathering upgrade.
When we were afforded the opportunity to access the pharmaceutical records of proposed insureds, reinsurers once again stepped up to affirm the merits of this remarkable asset.
After an interval of angst, many reinsurers came to recognize the unique potential of the cardiac marker NT-proBNP. By concurring with its use in lieu of screening ECGs, proactive reinsurers have helped make the insurance acquisition journey more customer-friendly.
None of these were radical departures from our longstanding scientific and fact-based underwriting approach.
On the other hand, with the exception of laboratory test risk scoring, the latest wave of alleged resources is nakedly radical and thus demands optimal scrutiny.
As desirable as cost savings and more rapid new business processing are, they hardly justify putting insurers’ bottom lines in harm’s way, let alone incurring the just wrath of producers, customers and regulators.
The hope here is that reinsurers will take an active role in sorting through these novel offerings.
Because if we fail to separate wheat from chaff – with a keen eye for unmasking any wolves lurking in sheep’s clothing – the consequences of our flawed stewardship will haunt those who inherit our accountabilities in the years ahead.