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What's sick about getting life insurance policy without a doctor's visit?
2017-07-24 21:50:33
Liza Tan

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Photo by: Pictures of Money/ Flickr

The New York Department of Financial Services (NYDFS) would like to know if there's anything wrong with so-called simplified underwriting, which means getting an medical insurance policy without the need to call a doctor or submit blood and urine samples.The process usually takes just minutes--or seconds.

Insurers operating in New York were reportedly set to disclose on July 25, whether they rely on external data sources to underwrite life insurance policies.  Last month, NYDFS superintendent Maria Vullo wrote and asked insurers whether they use credit scores, purchasing habits, affiliations, home ownership records, and even educational attainment as external data points to consider in underwriting procedures.

The NYDFS simply wanted to know how life insurers are able to cover people without doing even a basic health check, CBS News has reported.Among the data assumed to be gathered by insurers in such fuss-free underwriting for clients are credit reports, purchasing habits in both physical stores and online, affiliations with churches or other groups, homeownership status, and education.  Insurers, then, are assumed to incorporate these data into an algorithm that gives "yes" or "no" or "charge more" answer in granting the policy.

Some consumer advocates like Robert Hunter, director for insurance at the Consumer Federation of America, are reportedly wary of simplified underwriting, as it allows insurers to discriminate based on where the person lives, education attained, probable earnings, and even race or ethnicity.

The US National Association of Insurance Commissioners (NAIC) is also investigating how insurers use consumer data, algorithms and "predictive analysis" for underwriting.

Mary Jane Wilson-Bilik, a partner with the law firm of Eversheds Sutherland, said there's nothing illegal about collecting outside data sources, so long as the underwriting is actuarially justified.

The 2017 Insurance Barometer Study reveals that American consumers expect the life insurance industry to remain innovative and continue to meet their needs and preferences, including purchasing life insurance without physical exam, which 70 percent of the respondents preferred.

Now in its seventh year, the Insurance Barometer Study tracks the financial perceptions, attitudes, and behaviors of consumers in the United States, with an emphasis on life insurance.LIMRA, a not-for-profit research trade association, and Life Happens, a non-profit educational organization, jointly conducted the study.

Those who are interested in purchasing life insurance through simplified underwriting are drawn to the speed and ease that it offers.Other appealing benefits include: risk and price transparency (67 percent), an unbiased application process (66 percent), and no need for a medical exam (64 percent).

Another thing Americans are looking for in life insurance policies is that it should be "easy to understand".  This factor got the top mark among respondent American consumers at 83 percent.  The "ability to chat with a person" was next (66 percent), while a "faster sign-up process" was very or extremely important to over half of the respondents (51 percent).

"Our research shows increasing interest among consumers for speed, ease and transparency in the life insurance purchasing process, including an evolving trend to buy online." said Marvin Feldman, CLU, ChFC, RFC, president and CEO of Life Happens. "It's interesting to see that this desire is universal, across all generations.A Baby Boomer is just as interested as a Millennial when it comes to making the online buying process fast and easy."

Online life insurance purchase attempts have tripled since the Barometer's inception in 2011.

Another emerging trend in the life insurance policy underwriting that was uncovered by the 2017 Insurance Barometer Study was the so-called peer-to-peer (P2P) insurance.The P2P business model is used to provide coverage through a non-traditional experience geared towards online or mobile applications.  Thirty percent of those surveyed said they would be open to purchasing life insurance via a P2P platform, if available.

"While P2P insurance platforms are still in their early stage, it's a trend on the horizon that's worth paying attention to," said Jim Scanlon, senior research director at LIMRA. "Our research shows consumers value interacting with insurance companies in new ways such as simplified underwriting, P2P models and online sales.While the industry has been slow to adapt, we continue to see progress.For example, the percentage of completed online sales has increased by more than 15 percent in the past four years."

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