New Approach To Service

A New Underwriting Playbook: Accelerating The Inevitable

Helping insurance carriers think through what underwriting could look like on the other side of the pandemic

Study of life insurers new approach to underwriting conducted by SwissRe

The COVID-19 pandemic has created a confluence of events. Consumers are becoming more aware of their need for protection, while at the same time, circumstances are pushing life insurers to adopt new approaches to underwriting. Many of these changes are more consumer-centric and have been under consideration for decades. In many ways, the pandemic is “accelerating the inevitable.”

The purpose of this Post COVID-19 Playbook is to help insurance carriers think through what underwriting could look like on the other side of the pandemic. The goal is to find ways of maintaining the positive momentum that has been created toward more consumer-centric and less invasive ways to responsibly underwrite life insurance.

While it has long been said that life insurance is “sold not bought,” our industry has a significant opportunity to shrink the $25 trillion protection gap by helping turn consumers’ awareness of their need for protection into the actual purchase of protection.

Consumer Attitudes Toward Life Insurance During COVID-19

Early data indicates that the pandemic has resulted in increased consumer awareness of the need for life insurance protection. But, as discussed in the next section, it is far less clear as to whether that increased awareness will translate into completed sales that help close the protection gap.

A recent LIMRA survey found that two-thirds of consumers feel a heightened need for life insurance. It revealed that 26% of Americans were overwhelmed and anxious about their financial futures; and, since the outbreak of COVID-19 began, over 58% of respondents who have life insurance worried about having adequate coverage.

Amongst life insurance carriers who reported an increase in sales in May of 2020, a majority attributed the sales increase to an uptick in consumers’ interest in life insurance.

While awareness of life insurance appears to have increased, that has not necessarily translated into a greater understanding of how it works. Alarmingly, a Swiss Re study found that 33% of US life insurance policy owners said “no” or were “not sure” when asked if their existing life insurance would pay out if a policy-holder died of Coronavirus

Early Indication Around Sales Volumes

Despite reporting of “consumers panic shopping for life insurance in the face of coronavirus,” or general statements like “the demand for life Insurance is up,” the data reveals a mixed bag.

In terms of distribution and product mix, online sales have held steady or increased, while traditional face-to-face sales have been hard hit. Distributors focused on the ultra-high-net-worth market and niche markets niche markets (i.e. foreign nationals and company-owned life insurance (COLI) ) have seen the biggest decline. The product mix has shifted toward term products at lower face amounts.

While there are exceptions, most carriers, regardless of the impact on overall volumes, have seen a shift in mix toward term sales. Among 42 life insurers surveyed by LIMRA, sales volumes in all product categories were down in May, except for term. But even with term volumes up in May, term premiums were down. So, while more term policies are being sold, total premium levels decreased.

In the aggregate, even a significant increase in online direct sales cannot make-up for a modest decrease in face-to-face sales; as, according to LIMRA, direct sales only represented 6% of premiums in 2019

 Underwriting Changes Implemented In Response to COVID-19

As the pandemic hit and social distancing guidelines were implemented, carriers faced challenges in underwriting. In response, many, if not most, carriers implemented changes in two areas:

  • Expansion of “fluidless” accelerated underwriting (AUW) programs
  • Leveraging alternative data sources.

Expansion of Fluidless AUW programs

The goal is to find ways of maintaining the positive momentum that has been created toward more consumer-centric and less invasive ways to responsibly underwrite life insurance...

Many carriers with existing fluidless AUW programs expanded their age and amount guidelines to support more business through these processes. While some carriers expanded their programs “as is,” others amended the programs by limiting eligibility and the classes offered.

While some carriers have chosen to limit their risk by limiting the offered classes to standard or better, other carriers have eliminated their preferred best class to offset some of the mortality cost associated with the program expansion. Still, others have added a table to all offers to make the program cost-neutral. While these expansions have been viewed favorably by distribution, anecdotal evidence suggests there have not been a lot of policies issued through the expanded programs. This is especially true of programs that were expanded above $1M. It is unclear why this is the case, but potential factors could be:

  • Less business is written between $1M and $3M, which corresponds to a significant part of the fluidless AUW expansion
  • Brokerage General Agencies (BGAs) and agents prefer to build the file on larger cases, ordering requirements themselves and packaging the case for consideration at multiple carriers
  • Fewer policies of larger size make it through the AUW process due to additional medical or required financial underwriting requirements

Leveraging alternative data sources

Many carriers have also accelerated their use of alternative data sources. These data sources are used either within AUW programs, to support fully underwritten programs, or both. Examples of how new data sources are being used include:

  • Serving as a replacement for traditional non-electronic medical records, such as Attending Physician Statement (APS)
  • Serving as a replacement for insurance paramedical exams and insurance labs

Most carriers are using these alternative data sources in combination with Medical Information Bureau (MIB), Motor Vehicle Records (MVR), and prescription databases (Rx) data. Others are also using smoking propensity models and risk scores to determine what additional information may be warranted.

The use of alternative data sources is a promising development that has been accelerated by the pandemic. Leveraging these data sources has the potential of creating a much closer match to the information contained in a traditional APS. Therefore, it is not hard to envision leveraging these sources instead of an APS without experiencing significant mortality impact. Of course, use of (or requests to use) these additional data sources must be done in accordance with applicable law and regulation.

Charting A Path Forward

The life insurance industry should continue the movement toward more consumer-centric processes that have been created in response to the COVID-19 pandemic. Below are a few thoughts on how this could be accomplished.

The term “fluidless” underwriting is a misnomer. Our goal should not be to underwrite without fluids, but rather to determine when fluid test results will provide significant protective value. In cases where fluids are required, we should aim to get those test results in the least invasive, most consumer-centric way possible. The goal should not be to avoid fluids, but instead to avoid the need for exams, labs, and traditional APS.


It is said that “necessity is the mother of invention,” and this is proving to be true in the life insurance industry’s response to COVID-19. The pandemic has accelerated the inevitable advancements that our industry has been slow to adopt. These advancements benefit both the industry and the consumers it serves. As we emerge from the pandemic, we should not roll back some of the prudent changes we have adopted.

Our ultimate success will allow us to effectively and cost-efficiently access and use these alternative data sources, building rule sets that can analyze and act on the data, and generating agent and BGA adoption of processes, including e-Applications.

There is still much work to do, and our industry’s time is now. It’s time to lean in to these innovations and create a more consumer-focused approach to make our products more accessible – especially at a time when more consumers are aware of the value of the protections we offer.