What’s in the news at INN

What’s in the news on InsuranceNewsNet.com

IUL illustrations, drones and insurance, and what age you might want to consider LTCi.

[Editor’s Note: These are some of the major stories to which we are devoting ongoing coverage on InsuranceNewsNet.com.]

Regulators tackle ‘gamesmanship’ of IUL illustrations

by John Hilton

State insurance regulators have spent decades policing the fairness of life insurance illustrations. That cop work continues.

The latest issue is the same as the last several issues: indexed universal life insurance. Once again, the National Association of Insurance Commissioners’ IUL Illustration Subgroup pondered another rewrite of Actuarial Guideline 49 as this issue went to press.

Insurers quickly got around AG 49, approved by regulators in 2015, by offering IUL bonuses and multipliers. The IUL Illustration Subgroup working on tightening AG 49 was given this mandate by the Life Actuarial Task Force: “designs with multipliers or other enhancements should not illustrate better than non-multiplier designs.”

The resulting AG 49-A is barely 18 months old and has failed its lofty goal, said Sheryl Moore of Moore Market Intelligence and Bobby Samuelson of The Life Product Review, who co-authored a comment letter to the subgroup.

The Moore/Samuelson letter did not hold back on the need for immediate regulatory action. Some IUL fixed interest bonuses can generate illustrated income more than 60% higher than a base index (BIA) such as the S&P 500, they wrote.

“This is, in our view, entirely inconsistent with the intent of regulators in crafting AG 49-A,” the letter reads. “The gamesmanship currently occurring in illustrations is similar in effect and pervasiveness to the buy-up caps and multipliers that proliferated after AG 49 and resulted in AG 49-A.”

Moore Samuelson

More troubling

But new efforts to game AG 49-A are more troublesome, the Moore/Samuelson letter explained. Rather than increasing the option budget in order to augment illustrated performance — what buy-up caps and multipliers did — life insurers are now using essentially the opposite strategy, the letter said.

The Moore/Samuelson letter identified three tactics insurers are applying to new IUL illustrations:

» Using indices with lookback-based illustrated option profits far in excess of the BIA.

» Reducing the actual option budget so that the lookback rate for the non-BIA account matches the BIA. » Deploying the savings in a fixed interest bonus that is added to the illustrated rate and loan arbitrage.

The net effect is an illustration far better than one produced by, say, the S&P 500, but one that “in the real world, will very likely perform worse,” Moore/ Samuelson wrote.

A spokesman for the American Council of Life Insurers said it would submit oral comments similar to the group’s February letter.

“AG 49-A was designed to target multipliers and similar products and appears to have been successful in doing so,” that letter reads.

“If regulators believe the level of the illustrated values is unreasonable, we would ask regulators to provide clear objectives for a revised guideline.”

To read more on this story, visit bit.ly/iul2022

Traditional insurers are all-in on drones, other tech

Nearly half applying for LTCi after age 70 are denied

by Doug Bailey

Travelers is joining other old-line insurers that are working to bring new and innovative features to a centuries-old business that hasn’t changed much since its inception.

Alex Hartson is one of 700 professional drone operators —trained and employed by Travelers Insurance — who are on the cutting edge of claims processing. Gone are the ladders, measuring tape, Polaroid cameras and other arcane tools of past claims adjusters.

With drones, professionals like Hartson can measure, assess and report roof damage, gutter and chimney wear and tear, and a host of other property claims issues without ever leaving terra firma.

“So as long as there are no airspace restrictions, we’re flying at almost every one of our property inspections,” he explained. “It’s a tool that we have in our capacity, where if it’s going to help us from an efficiency standpoint, or a safety standpoint, we want policyholders to consider it as their first option that gives them a good glance at what’s going on with the property.”

Partly because of consumer demand for the Amazon-like service experience and partly due to the supposed threat — as of yet largely realized — of young insurtechs to disrupt the industry, traditional insurers are investigating and investing heavily in new consumer-friendly, high-tech tools. Using artificial intelligence, data mining, analytics, even virtual reality goggles, the dusty old insurance industry is just now coming into the technological age.

Full automation

Travelers, for example, has a proprietary geospatial tool to accompany its drone strategy. That tool maps almost the entire country with high-resolution photos used to compare with photos taken after a catastrophe such as a hurricane, tornado or wildfire.

“What we have is an AI program running in the background that will tell us all sorts of things like how many approximate claims we’re going to have, which customers have more serious damage versus which customers have less serious damage,” said Jim Wucherpfennig, vice president of property claims at Travelers.

Automating the entire insurance processing system is the goal now of many insurers who, some say, have been slow to invest in and build new technology systems. Even now, many computer programmers, software writers and high-tech companies claim that the insurance industry is their building their market.

Technological innovation can also serve as a recruitment incentive for an industry badly in need of attracting young talent to its field.

To read more on this story, visit bit.ly/insuredrones2022

by Doug Bailey

Nearly half of individuals who apply for traditional long-term care insurance after age 70 are denied by an insurer, according to the American Association for LongTerm Care Insurance. That’s because their health records disqualify them or the insurer simply doesn’t write policies for advanced-aged people.

“Consumers simply are not aware of the need to health-qualify for long-term care insurance, so they delay looking into this important protection,” said Jesse Slome, AALTCI director. “After age 65, it gets increasingly hard to be accepted for this protection.”

According to Slome, nearly half of individuals who applied for traditional longterm care insurance between ages 70 and 75 were either declined or had their application deferred. Over one-third of those applying between ages 65 and 69 were declined. The data comes from association research as well as the just released 2022 Milliman LTCi Survey.

“The sweet spot for looking into longterm care insurance is generally between ages 55 and 65,” Slome said. “Once people are covered by Medicare, they start seeing more doctors, which is great, but that often increases the likelihood that medical conditions will be included as part of their health records.”

But most people in the “sweet spot” aren’t ready to buy LTCi, according to Bob Chitrathorn, CFO/vice president of wealth planning at Simplified Wealth Management.

According to Genworth and Merrill, A Bank of America Company, seven in 10 Americans turning 65 today will need care for prolonged periods in their lives.

Long-term care insurers originally underpriced their services because they underestimated how long people would live or based their prices on life expectancy data at the time. Moreover, underfunded policies had to be frequently revised or caused some LTCi companies to fail, damaging the credibility and stability of the entire industry.

The delay in securing long-term care, or the rejection by insurers, has thrown caregiving responsibilities to the children of aging parents. A new survey by Northwestern Mutual showed 46% of millennials have been or are currently caregivers and 69% took on additional caregiving responsibilities during the pandemic.

This has made them more acutely aware of how secure — or insecure — their parents are in terms of both their health and their finances, Northwestern Mutual said.

To read more on this story, visit bit.ly/ltci2022

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@ innfeedback.com. Follow him on Twitter @INNJohnH.

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at doug.bailey@innfeedback.com.

Underwriting’s Digital Renaissance

How innovation is enhancing the customer experience.

The perfect storm of shifting mentalities created by the pandemic and increasing amounts of digital data and processes brought a transformation opportunity to the insurance industry. While the moment was a catalyst for many insurers, Legal & General America (LGA), was already a year into development of digital application and enhanced automated underwriting offerings when the pandemic hit. “The pandemic’s influence on the public’s mindset encouraged us to further lean into our digital transformation,” said Zach Pugh, Chief Underwriter at LGA. “Our team dove in headfirst, leading the way among American life insurers, focusing on the ease of process for our advisors and customers, freeing our underwriters to spend less time on mundane tasks and more time moving applications through the process quickly.” Insurance carriers began driving the digital change to speed up the entire application process for those looking at protecting their families. With the convenience of online applications, more families can protect their assets and loved ones. Since launching its digital experience, LGA has found that of applications started online, 90% are now completed, compared to the previous 40% when using a non-digital, paper application. 55% of applicants can do so lab-free and 20% of applicants even get an instant approval, which means they have a life insurance policy within seconds of completing the application. In an industry plastered with paper applications, the historical back-andforth game of telephone between underwriter and advisor could add weeks to a typical application process. As a way of reducing attending physician statements (APS) by leveraging advances in both medical and digital technologies, LGA simply “lifts” recent lab results from partner organizations with its Lab Lift solution. Well-informed underwriting decisions, under the guidance of experienced underwriters can easily be accelerated with the assistance of these advanced technologies and data, which automate some of the more tedious application processes to free up time for applicant, advisor and underwriter. This enables underwriters to spend their time and expertise on the more complex, less turnkey applications that require a more hands-on approach. The online experience allows the advisor to play a more consultative role along with the administrative tasks.

In an effort to leverage the mountains of historical underwriting data through machine learning techniques, LGA brought in data scientists and actuarial experience teams to support the underwriters’ transformation.

“By bringing the expertise of underwriting, actuaries and data scientists together, we’re engaged in a modernization effort that allows us to identify and respond to changes in our mortality experience more quickly,” said Head Data Scientist at LGA, Elijah Gaioni. “This capability has become all the more important both in the COVID era, and as the pace of innovation in the product and underwriting spaces continues to grow.” Advisors can enjoy increased free time either with their own families and friends or by getting more customers during the day and increasing their commissions. For example, the average time to get a policy commission was previously 40–50 business days. That has been cut by more than half with LGA’s experience, with a 2022 goal of

having a final decision on 50% of all applications within 10 days. An advisor could get two and a half policies’ commissions issued in the same amount of time, making the digital experience one that is not only convenient but efficient and effective toward bottom lines.

Looking to the future of term life insurance, two goals rise to the top — taking friction out of the buying process and making insurance more viable for those who are currently underinsured or uninsured. As an industry, the innovations around disease detection, management and treatment including immunotherapies for cancer patients, wearable devices that measure heart rate and breathing, drug delivery systems, cell-free DNA screenings, and fall monitors, will continue to create opportunities into the life insurance and underwriting worlds, ultimately driving down costs and increasing accessibility for more potential policyholders. The goal of smoothing over the friction can be addressed now, without waiting for new advancements in the medical world. We see this already as digital systems are removing some of the conflicts that underwriters must address. Their tasks are not easy; take mountains of complex information — medical and pharmacy records, criminal records, credit reports — and find the proper rates and risk tolerances. Following those underwriting rules is only about 10% of the job, 90% is the mentally strenuous work of bringing it all together. As technological advances assist in that 10%, underwriters can do what they do best more effectively, speeding up the process overall of getting coverage approved and written. “Too often in the insurance industry are resources left on the table for too long, waiting for other industries to experiment first,” Pugh says. “We’re excited to be leading the way at LGA. By bringing all the different machine learning and AI tools to the workbench, things that used to take weeks can now be instantaneous. We can get more information up-front than ever before, taking some hassle away from our people and applicants.” LGA continues to look for ways to bring accessible products to the public. Pugh emphasizes that while others may lean on digitalization and underwriting innovation to provide auto-decisions for a cost, LGA will focus on constantly, insightfully leveraging data aggregation for more digital application approvals without having consumers paying an additional premium. Insurance and technology are having their moment. Insurtechs are now known entities and cropping up on every corner. Innovation in underwriting is not going anywhere. The last bastion of analog processes is moving into the 21st century with calculated risks, ironing out any irregularities and ensuring that all these changes serve a functional purpose for carriers, advisors and most importantly customers. With established, storied organizations there is a security and comfort in knowing that the technological transformation is done in a thoughtful manner, taking lessons from Silicon Valley and applying them with precision. The future of underwriting continues to be full of opportunities to get more lives covered. And more lives protected means brighter futures for more families.

Visit LGA-uw-explained.netlify.app for more information on how we’re transforming the underwriting process to make it easier for your clients to access life insurance.

LGA’s Digital Experience

by the numbers

90%

of online applications started are completed

55%

of applicants are exam-free

20%

instant approvals

30%

of applicants are approved within 10 business days

The new digital application is available for Banner Life business only at this time and is not available in New York. Legal & General America life insurance products are underwritten and issued by Banner Life Insurance Company, Urbana, Maryland and William Penn Life Insurance Company of New York, Valley Stream, NY. Banner products are distributed in 49 states and in DC. William Penn products are available exclusively in New York; Banner does not solicit business there. Clients who do not fit all automated underwriting eligibility requirements may need to submit additional information like a paramedical exam or other labs or medical records. For broker use only. Not for public distribution. The Legal & General America companies are part of the worldwide Legal & General Group. For broker use only. Not for public distribution. OPTerm policy form # ICC18-OPTC and state variations. In New York, OPTerm policy form # OPTC18-WP. CN 07192022-1