Resetting the Bar: Key Metrics in Life Insurance New Business and Underwriting

by Karen Monks,  Tom Scales, October 20, 2016
Operations/ Benchmarking
Global

Abstract

Celent has released a new report titled Resetting the Bar: Key Metrics in Life Insurance New Business and Underwriting 2016. The report was written by Tom Scales and Karen Monks, analysts in Celent’s Insurance practice.

For insurers, the new business and underwriting process is a key to their success.

Insurers vary in their key metrics, but all have improved since 2007. High face value writers process fewer applications at a higher cost than moderate face value writers. All insurers have seen a drop in policy values; however, volume of policies issued is equal with 2007. This means costs per policy must continue to decrease for insurers to remain profitable.

High face value writers experienced a smaller improvement than moderate face value writers. With larger operating margins, high face value writers have more leeway than moderate face value writers in terms of urgency of improvements. Moderate face value writers have a lower cost base and no choice but to pursue automation.

Changing policyholder expectations in terms of digital may negate the benefit of size. Automation speeds up cycle time, improves accuracy, and reduces costs. Depending on the automation it can divert people to higher-value work (like underwriters only being used for complex, high face value policies) or reduce staffing levels depending on the strategy being pursued.

“We are seeing improvements in carriers between the two reports,” said Monks. “Companies have made investments in their people and technology, and it shows.”

“As a former operations leader, I am encouraged by the progress,” said Scales. “But we believe there is still room to improve.”

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is part of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

 

Unit Costs

1

 

Staffing Issues

1

 

Cycle Time

2

Introduction

3

 

Key Research Questions

3

 

Focus Areas

4

 

Method

4

 

Limitations

4

Key Metric Summary

6

About the Respondents

7

 

Key Findings

7

 

Background

7

 

Face Values and Types of Policies Sold

7

 

Participants by Channel

10

Unit Costs

12

 

Key Findings

12

 

Measuring Cost

12

Staffing

15

 

Key Findings

15

 

Staffing and Business Volume

15

 

Staff Counts by Function

15

 

The Impact of Staff Counts by Position

17

Cycle Time

20

 

Key Findings

20

 

The Need for Speed

20

 

Insurer Type and Process Step Comparison

21

Conclusion

23

 

Recommendations for Insurers

23

 

Recommendations for Technology Providers and Advisers

24

Leveraging Celent’s Expertise

25

 

Support for Financial Institutions

25

 

Support for Vendors

25

Related Celent Research

26

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