The Evolution of Rule-Based Life Insurance Underwriting Systems

Recent shifts in technology give carriers a reason to re-evaluate rule-based processing and its ability to deliver value in life insurance underwriting.

Although the quest to reduce life insurance underwriting costs and cycle times using rule-based processing is not new, shifts in available technologies are reinvigorating it. By implementing a next-generation new business process, Celent estimates a typical carrier that issues 40,000 policies a year could save more than US$1.3 million annually.

"Rule-based processing definitely has a place in life underwriting," says analyst Craig Weber, author of Celent's latest report, The Evolution of Rule-Based Life Insurance Underwriting Systems. "But carriers need to create next-generation systems if they want a good return on investment. That means tight integration, component-based architecture, and high levels of automation and control over data, plus the ability to deliver rule-based intelligence all the way back to the point of sale."

"A lot of carriers have some of the pieces in place," Weber adds. "But very few have put them all together."

The report suggests that an emphasis on using rules engines to power underwriting decisions may be misplaced, particularly for carriers writing high face amount business at lower volumes. Components of the new business process that deliver quick ROI and allow for greater distribution channel flexibility include electronic applications, automated requirements management, and alternative data collection and underwriting.

The report includes two case studies that illustrate key concepts.