The Evolution of Rule-Based Life Insurance Underwriting Systems

by Craig Weber, November 22, 2002

Abstract

Boston, MA, USA November 22, 2002

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, . "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.

A is available online.

of Celent Communications' Life/Health Insurance research service can download the report electronically by clicking on the icon to the left.

        

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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 a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents

 

Boston, MA, USA November 22, 2002

Return to report Abstract

 

EXECUTIVE SUMMARY 3
INTRODUCTION 4
  Rules in Life Underwriting 4
  Bring on the Intelligence 4
  Lessons Learned 6
  Do Opportunities Remain? 7
NEXT-GENERATION RULE-BASED SYSTEMS 10
  An Evolving Model 10
  Getting There From Here 12
  More Than Approvals 13
  Where to Start 14
  Defining the Value 16
  Tools and Technology 18
CASE STUDY: DIMINISHING RETURNS AT TOP 20 CARRIER 21
BALTIMORE LIFE INSURANCE CASE STUDY 25
CONCLUSIONS 30
  Looking Ahead 30

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