Insurance exams on life support
Many can get a policy within minutes of applying online
Peeing in a cup, giving a blood sample and stepping on the scale were once unavoidable (and often dreaded) parts of applying for life insurance. But data services and technology are gradually replacing the life insurance medical exam.
Today, insurers can learn about you from instantly available information — from the medicine you take to your motor vehicle record — and use algorithms to project life expectancy. As more data become available and automated systems get smarter, insurers will be able to sell more policies.
“In the next 10 years we are going to see that requirement go away … for most people,” says Elliott Wallace, vice president and general manager of life insurance for Lexis-Nexis Risk Solutions, an analytics firm in Atlanta.
With a process called accelerated underwriting, young and healthy applicants can qualify for up to $1 million of term life insurance without an exam and get a policy within minutes of applying online. The application asks health questions, and with your permission, the system pulls data such as your motor vehicle record, information from previous life insurance applications and prescription drug history.
Among companies doing this are Haven Life, owned by MassMutual; Ladder, which sells Fidelity Security Life Insurance policies; and SoFi, which sells Protective Life policies.
Prices are competitive with term life insurance sold the traditional way, unlike the small, no-exam policies pitched on TV to seniors. Those are expensive because they use little or no data.
Accelerated underwriting will expand to more policies, including whole life insurance, as more data become available, Wallace says.
Not everyone is a fan. Consumer advocate Birny Birnbaum, executive director of the Center for Economic Justice, says the process for pricing insurance should be transparent, not a decision-making model only insurers understand.
“We think regulators should be collecting and surveying the types of data insurers are using and make that public,” he says.
Wisconsin Insurance Commissioner Ted Nickel says regu- lators have increased efforts to better understand and embrace innovation. “We aim to safeguard consumer protection and needs while also encouraging innovative solutions,” he says.
Insurers want to rely less on medical exams so they can sell more policies and save money.
The waiting time from applying to buying a policy is a few weeks or more if an exam is required. The longer it takes, the less likely an applicant will buy, says Robert Kerzner, president and CEO of LIMRA, an industry trade and research group.
LIMRA estimates 48% of U.S. households don’t have enough life insurance, with an average coverage gap of $200,000.
“We have to make it easier to buy,” Kerzner says.