The Accelerated Underwriting (A) Working Group (the “Working Group”) was established at the National Association of Insurance Commissioners (“NAIC”) Summer 2019 National Meeting as we reportedpreviously. The Working Group met by conference call on July 31, 2020 as part of the NAIC Summer 2020 National Meeting. In the conference call, the Working Group provided an update regarding its progress with regard to its charge to consider the use of external data and data analytics in accelerated life underwriting.
The Working Group has concluded phase I of its charge, having heard presentations from various interested parties including actuarial consulting firms, the American Academy of Actuaries, life insurance companies, and the Center for Economic Justice. Based on its phase I findings, the Working Group considers accelerated underwriting (“AU”) to be favorable to insurers as well as consumers as it lowers expenses, allows for shorter time periods for issuance of policies, and leads to higher acceptance rate of policies as compared to traditional underwriting processes. Accordingly, the Working Group anticipates the percentage of AU policies to increase from approximately ten percent (10%) of currently issued policies to potentially as many as forty percent (40%) of policies over the next decade as existing restrictions on the use of AU are relaxed and AU techniques can be applied to more product types.
As it enters phase II of its charge, the Working Group has thus far identified and is considering the following issues: (1) whether consumers understand what information about them is being collected by insurers and how it can be used; (2) whether the AU results are transparent and explainable to the applicants; and (3) whether AU is unfairly discriminatory against certain protected classes. With regard to this last point, the Working Group noted that some companies want to consider behavioral data (e.g., gym membership and grocery shopping habits) in making underwriting decisions, but there is concern that this may lead to issues including incorrect findings, potentially unlawful discrimination against protected classes, and/or age discrimination for otherwise healthy and low risk individuals.
Looking ahead, the Working Group plans to conclude phase II of its charge over the next month, and to begin drafting its conclusions regarding AU with a goal on having a first draft released for comment by the end of December 2020. The Working Group aims to present its final work product to the NAIC A Committee by the Summer 2021 National Meeting.