Author: Jonas Wagner
The market for life insurance is in a state of flux. Due to the low interest rate situation and the increased cost pressure, Swiss insurers have to adapt their product range in order to be competitive. In particular, they must also successfully compete with new providers such as frankly. However, through the targeted improvement of the customer experience and a transparent and automated underwriting process, they can gain a decisive advantage.
Compared to insurances such as home contents or motor vehicles, the life insurance segment tends to have a more complex underwriting process. This is justified, as there are usually large amounts of money at stake and policy terms tend to be long (potentially 47 years for 3a). Due to the high complexity of underwriting, many insurers do not dare to take the step from a manual to an automated process. However, it is underestimated that exactly this is an excellent starting point to differentiate through customer experience with the help of automation and thus to exploit a great potential.
Let us imagine the following situation: A customer wants to take out a 3a insurance policy including premium waiver, death and disability:
Our experience with leading Swiss insurers shows that certain underwriting processes run the risk of trapping customers in an endless loop of applications. Not only does this result in a poor customer experience, it is also extremely inefficient and therefore very costly.
What can be done in such a situation? One possible solution to the described challenges is quite obvious: In many places, such complex underwriting processes can be completely automated. The decision criteria for underwriting are standardized and quantified for almost all cases. As an example, let's take the smoker yes/no criterion. If yes, the potential policyholder receives a smoker surcharge. However, the amount of the surcharge is not assigned arbitrarily, but follows a certain logic (e.g., How often does he smoke?). Ergo, a rule engine can be used as the core of the automation, which maps and manages the underwriting questions and rules. This speeds up the process and manual intervention is no longer required. Rule engines are already in use in many places, but either not in life insurance or not fully integrated into an automated underwriting process.
The figure above shows an example of a possible automation:
The main advantage is certainly that costs can be saved thanks to automation. One of our customers has estimated that at least 60% of all applications could be processed automatically, very likely even more than 90%. Currently, they have not started with automation yet... Another advantage is that the advisor can do the underwriting together with the customer on the spot and thus reach a conclusion during a single meeting. Moreover, thanks to the transparent underwriting process, the customer experience is much more pleasant and (over)meets the customer's expectations.