OREANDA-NEWS. September 22, 2015. “In today’s competitive environment, life insurers must win as many customers as possible, but at a price that is both profitable and equitable,” says Michael Rundshagen. “This means their underwriting risk assessment techniques must be data driven and precise.” Excerpts:

“Life insurers currently collect risk information through medical questionnaires on the underwriting proposal form, general practitioner (GP) or attending physician statements, and medical tests. If the applicant is insurable, insurers assign the applicant to either preferred, standard or sub-standard classes using a preferred underwriting classification system. However, the approach is inherently subjective. Hence, applicants with no obvious risk parameters sometimes end up being rated differently by different insurers.

Numerous medical innovations over the last decade offer a promising remedy. They include mapping of the human genome, cloning of human stem cells, targeted cancer therapies, combination drug therapy for HIV, minimally invasive or laparoscopic surgery, use of smart phone apps for medical imagery and remote treatment delivery, proliferation of bio-monitors, etc. In keeping with these innovations, underwriting risk assessment techniques have also evolved.

Emerging concepts in the medical risk assessment arena include evidence-based underwriting (EBU), use of wearable fitness devices in health insurance and the application of gene test results to the life and health underwriting process. These innovations may lead to better understanding of particular risks and more granular risk classification.

Innovations across medical fields are creating new avenues for life and health insurance risk assessments: evidence-based underwriting, data from wearable fitness devices used in health insurance and gene test results for life and health insurance underwriting.

Systematic collection of medical and customer data by various players, along with continuous improvement in big data technologies and predictive analytics, will help evidence-based risk assessments to gain ground.

Insurers can use the applicant’s genetic info for more precise disease and death risk identification and charge a premium appropriate to the risk. But, in addition, insurers can leverage genetic information to devise innovative products.

While EBU and data from wearable bio-monitors could help advance risk assessment, genetic data also can help propel innovative product and market developments. Both are more objective and transparent ways to assess risk. If the above techniques are executed judiciously, they will help insurers and consumers: Insurers will be able to accept risk at appropriate price points resulting in more sales and profit; consumers will pay a fair price for their individual risk.

As regulations and insurance industry practices evolve, insurers who proactively incorporate medical innovators into their operating models will be better positioned to prosper in the years ahead.”