BISA Magazine - Quarter 1, 2017 - 25

Think of all the junk mail you receive with your name misspelled.
There is still no self-righting mechanism.
- John Lucker, Deloitte Consulting
That said, some innovation is taking
place. Some insurers are taking data
from multiple sources-blending it
together in a kind of ensemble, Lucker
reports. This way, even if one broker's
information is inaccurate, it will be nullified by the others.
This is promising, in the Deloitte consultant's view, but, again, one really
doesn't know the source of the data
broker's information (i.e., companies
like Experian). Could they all be using
a single source? One can't be sure.

Lucker has seen progress with some
insurers creating a kind of partnership
with customers and potential customers, allowing them ways to "opt in"
when it comes to providing more useful data, such as fitness bands to show
that you are exercising or sleeping well.
This is "information that I can provide
to insurers to prove that I'm a better
than average risk," explains Lucker.
Along these lines, telematics data might
be provided to life insurers (not just
auto insurers) so consumers can show
they drive safely (which also suggests
they are a better life risk).

Meanwhile, life insurers are still striving
to attract new customers, consumers still
struggle to understand life insurance,
and insurers' investment yields have
been poor (meaning they need to raise
prices, which in turn hurts their products' attractiveness).
In the long run, "insurers have to find
ways to de-commoditize themselves,"
says Lucker. Otherwise, it's just a price
game where the cheapest commodity provider prevails. And, in his view,
that's a terrible business model. ▲

Solution: 'Triage'
Is the glass still "half empty" with regard to predictive analytics
in the context of bank-sold life insurance?
"We have the data," says AITE Group analyst Samantha Chow,
but there must be a way for customers to dispute it, to challenge
it. "It's a fine line using social data-data that is publicly available:
MIB (Medical Information Bureau), MVR (Motor Vehicle Records) and Rx-but also Facebook, LinkedIn, and Fitbit accounts,
all of which can be used to score an insurance application.
The only way to do this may be triage, or "pathing," whereby
if social data raises questions (e.g., picture of a young adult
smoking a cigarette on Facebook), the life insurance carrier
doesn't reject that individual for coverage outright, but says
something like: "If you're still interested, we'd like you to take a
paramedic exam."
The answer may be two tracks: a fast track (immediate underwriting) and a slow track (paramedic exam).
It's a matter of fairness-the young adult smoking a cigarette on
Facebook could be pretending, playing a role.

It will take more time for carriers to accept and produce new
methods, Chow said. There are legacy problems-old systems
that can only handle so much; they were designed to provide
binary solutions-accept or reject-and can't handle "pathing"
solutions well. "Those things will have to change," says Chow.
Will banks really be selling permanent life insurance one day?
"I hope they do," says Chow. People trust their banks. They're a
natural distribution outlet for life insurance in the 21st century-
especially when it comes to the middle market-people who
need $300,000 or $500,000 in coverage, but who no one
wants to underwrite.
As Chow wrote recently on her blog:
"The life insurance industry continuously talks about how it
can close the gap in life insurance ownership, and how it can
penetrate the millennial market. Well ladies and gentlemen of
the life insurance industry, the answer is ... not with this type of
underwriting requirement. No way! It has got to change. There is
way too much data out there, and too many less-intrusive ways
to get information about someone's medical history." -AS

25
BISA Magazine

Table of Contents for the Digital Edition of BISA Magazine - Quarter 1, 2017