Have you become frustrated with the lengthy life insurance application process from submission to issue?
You’re not alone. Nobody involved in the process is pleased with its slow nature -- from carrier to agent and everyone in between.
The carrier isn’t happy when the approval process drags on because it costs them money.
You as the producer aren’t happy because you don’t get paid until the policy is issued, put in force and the premium is paid.
The client isn’t happy because now that you got them to commit to the policy, they want it yesterday!
Like it or not, the process has never been a short one and that is just the way it is.
But that may be changing.
The time it takes to process an application and get a policy issued is shrinking.
Of course, most smaller-sized cases, usually for the younger and healthier folks, typically get processed and underwritten quickly. But those are generally the exception rather than the rule.
The larger, more lucrative cases are the ones that seem to take forever, but that’s changing -- a move largely driven by the carriers.
The Way It Used To Be
As we all know, life insurance carriers look to manage their risk by thoroughly assessing each case you submit to make sure that they don't miss something that one day could cost them hundreds of thousands -- if not millions -- of dollars.
If you’ve been around for a while, you probably think that cases used to be underwritten faster, even though the technology wasn’t what it is today. In fact, to some degree, this is true -- especially back in the day when carriers had more freedom to make exceptions based on a “business decision” and there was less scrutiny from the reinsurers regarding the carrier’s underwriting decisions.
Beside the fact that the carrier wants to avoid an unfavorable audit from their reinsurer, the underwriter on the case doesn't want to be the one whose decision caused the unfavorable audit.
The result of this is that the approval process slows down while the underwriter makes doubly sure that she’s making the right call on a specific risk. The only way to effectively do this is to use and depend on traditional tools such as lengthy doctor reports, insurance exams, lab studies and commercial inspection reports, all of which can drag out the approval process to many weeks if not months.
How It’s Changing
The future looks bright for application processing -- thanks to technology.
Given the time-consuming and expensive tools (referenced above), life carriers are doing everything they can to not only expedite the process, but more importantly reduce their costs.
New technologies are facilitating this shift, and we are on the cusp of seeing a lot of changes in the life insurance industry to make the “application to issue” process much easier and faster for everyone.
These changes would include utilizing things like:
- Electronic medical records, cutting out significant delays of obtaining medical records.
- Predictive modeling, where habits also have an effect on risk.
- Reliance on more alternative data that life insurance carriers believe paint a pretty good picture about the type of risk they’re facing.
Carriers are currently using some of these tools to speed things up and you can expect them to utilize more of them. In fact, as I’m writing this blog, more than one life insurance carrier has a 48-hour approval process on certain cases.
And, believe it or not, we’re not too far away from same-day approvals! Yes, you heard that right. So don’t be surprised when it happens.
So what is the good news here? Well, it just may be that all of those people who have been unhappy with the historically lengthy process can now look forward to a substantially shorter processing by life carriers embracing as many new technologies as they can to speed up the process and get more life insurance in the hands of your customer.
It’s only a matter of time -- and new technologies.