Transcription:
Patti Harman (00:06):
Hello and welcome to the Dig In podcast. I'm your host Patti Harman, editor-in-chief of Digital Insurance. As the adoption of artificial intelligence continues across the insurance industry, it's having a major impact on gathering and synthesizing large amounts of data for carriers so they can make coverage decisions more quickly. One of the areas where it's having an impact is in the life insurance space as years worth of data can be reviewed and underwriting decisions can be made in hours rather than days or weeks. Joining us today to share how carriers are using AI and its impact in the life insurance industry is Brett Laker, head of North America for Underwrite Me. Thank you so much for joining us today, Brett.
Brett Laker (00:54):
Great. Thanks for having me, Patti. Nice to be here.
Patti Harman (00:57):
So let's just start with a brief overview of the insurance industry, and I'm going to ask you how has it evolved over the last three to five years from a technology standpoint, what has changed? What are they doing, all of that sort of thing.
Brett Laker (01:14):
Sure. So I might expand that to five to 10 years just because.
Patti Harman (01:18):
Okay, that's fine.
Brett Laker (01:19):
Only because, well, we lost three or so with Covid. So I'd say really the trend has been over the past decade, maybe longer, that life insurance sales have been relatively flat in the industry and that's that's kind worldwide. But the U.S. particularly, because it is the largest market globally and it's really hard to pinpoint what one overarching contributing factor to that has been. I think you've got a bunch of different things that influence it, which is buying characteristics of different products. And so you can have economic factors, not having enough disposable income. People don't see that that's a priority. You have interest rates where money has to go to other places. And then with the worldwide pandemic as I'd mentioned, so there's always been, I guess, headwinds to selling life insurance, and that's where that old saying is, insurance is sold, not bought. And that does seem to continue to resonate in our industry.
(02:18):
I think one of the things for me is why, and I think that for me as an underwriter, I think that's a friction point and I think it's a bit more challenging for people to understand that process, why they have to go through what they go through with the traditional underwriting approach. And so that's where we're starting to see where technology is coming into that arena to help with that buying experience. So it's helping on the front end with distribution, but more importantly I feel like I'm biased again as an underwriter. More importantly, I feel like the underwriting technology is definitely helping with that experience for buyers. We've moved forward towards web-based direct to consumer options, agent driven e-applications. We've got accelerated programs, which is no medical underwriting unless it's after the fact through a post issue sampling process. All of that's been a slicker, faster and more understandable application journey for customers. And so I think that that's where things have evolved the most over that. I'll use your three to five, but it has been a bit longer. It's just maybe got a little more of a lens on it lately.
Patti Harman (03:27):
Alright. Well, and I appreciate you giving us the longer lens because when I'm talking about technology, it's like it's just changed so much in the last few years. So that's why I went with a shorter timeframe. It was interesting. I was looking and I've seen a couple of stories and in one story they were saying that 35% of respondents were saying that signing up for joint insurance was a bigger step than saying, I love you for the first time or moving in together. And they also said that four in 10 respondents say sharing a joint policy with their partner was almost like sharing a streaming password or adopting a pet together, which I thought was a very interesting perspective to have on insurance. But do you see more people using life insurance as part of their long-term financial planning strategy now and why or why not on that?
Brett Laker (04:24):
That's interesting around the joint, I've never actually heard that. I'm not sure why it has to be that stressful, but maybe I've not had to think about that one. Yeah, I do see people using life insurance more in the financial space, and I think that a majority of the sales that, at least with companies that I've worked for and worked with, they are for around financial reasons, not just that debt benefit coverage. So I think that is becoming more and more of the sales process. The term is obviously the easiest to understand, but then you get the more complex of a universal life where you have an indexed or a variable, you've got whole life. So those require a fairly dedicated sales process. And the reason why I think people are doing that now is because we're in a generation where the majority of people don't have defined benefit pension plans.
(05:17):
We're sort of the Guinea pig generation for 401ks. When I say generation, I'm X and I feel like there's sort of a mixture of boomers, but there, I think X is predominantly going more 401k and then as we go further it's like, yeah, it's much more. So I think that those options have to be part of an education to the public and I think that life insurance is a great option for that. Also with annuities now, annuities don't have the life insurance component of it, so a lot of the life carriers sell annuities and so you are underwriting in a different way for those sort of things. So yeah, I think that we're going to see more and more of it. And I just think that with 401k caps and restrictions around, say Roth people are looking for other tax advantage vehicles and life insurance really does a great job of that.
Patti Harman (06:04):
It really does. I know my financial advisor was, we were going through everything and she wanted to know what are you doing in terms of life insurance? What does that look like? And I think it really is, it's just another tool in our financial toolbox in terms of how we want to use this. So how has this industry traditionally handled the underwriting process and where do you see some of the major pain points in terms of managing data and using it effectively?
Brett Laker (06:36):
I alluded to earlier that's probably one of the strongest pinch points of this pull process. And so traditionally, I know we have a wide range audience on this. So you have an agent amount chart and it dictates what you need to get for an applicant. And so if you take that sweet spot of where people are buying insurance, so they're sort of say in their mid thirties to sixties kind of thing and million to $2 million for an op, you would have the application which captures the self-disclosed health information and financial details to justify the coverage. Then you would also have to do a paramedical exam, which means you're going to draw blood and you're going to get a urine sample. So that's sort of invasive and it takes time to schedule and everyone loves that. So that's one of the sort of an impediment around that.
(07:25):
And then if there's something in those, then you're going to order an attending physician statement or electronic health record. And so all of that takes time and it also requires review and that's the underwriter's job. And so you could have weeks and months going on for that sort of process. I actually, myself bought some insurance a number of years ago and I went through it as a informed applicant and it was three months to get issued and I actually have a pretty clean record medical history, and I still remember my doctor asking me about why they ordered the records from her and I said, it's for life insurance, just go ahead and charge 'em for it. And she said, well, you have virtually no history. I'm like, I don't know what to say. So as a consumer, I saw how painful that was. And so I think that AI is giving us some better opportunities for not to get around necessarily.
(08:16):
We have data points, I know we're going to talk about that in a little bit, but if we just take that more traditional approach that has been sort of time tested and proven about the protective value, I think that the AI potential is to analyze that information, provide summarizations to an underwriter or recommendations based on guidelines through their underwriting manual. So I think it adds to the underwriter's role, but speeds it up. And it also can make that process for the buyer so much better too, because if you know right away that you need to order that attending physician statement because there's a reflexive question set, then the ready for it, rather than wondering why two months later you're now ordering the record. So there's a lot of uplift there and we've been seeing it in the last couple of years where the potential is there.
Patti Harman (09:06):
Okay. Yes, that was a good segue into my next question. I wanted to know how you're using AI and is it really changing how insurance professionals use information across that insurance ecosystem and how are these factors affecting the life insurance space specifically then? So you said about tracking records, that sort of thing. Is it affecting it in other ways?
Brett Laker (09:31):
Yeah, so I think that the data products that we have available as well now, so if you look at say, lab pictures from exam one or prescription histories from several providers, motor vehicle records, things like that, those are very individualized reports. And so that's something you can just say analyze it. You can even put it through a large language model if you need to extract what you want out of it. But then you can have predictive models, you can have that, that's less individualized. You would focus on those to try and determine based on your inputs, whether it's credit risk scores or some of the questions that were answered on the application and you've put it through the model, can that indicate whether or not somebody might not be telling the truth, which is a big part of the job as an underwriter. I know people lie sometimes it's just what it is. I don't want to sound negative, but it happens. Or maybe they don't understand the questions either. So if I ask you, have you ever had any cerebral vascular disease and no, have you ever had a stroke? Yes, you might not know one is the same. Right?
(10:36):
And so we struggle with that as an industry. So I think that the AI side of it and the technology and the data sources help us get those on the table better and quicker to the consumer and have a better decision making. So again, I'm leaning back into underwriting, but that all trickles through to pricing for the product. If we hit mortality assumptions so the future products can be priced properly and aggressively is not the right term maybe, but appropriately, but whereas if you're having to pay for past sins, then you got to sort of charge up more on the future stuff. So I think that that's where the entire ecosystem of insurance can benefit from that risk selection aspect of it. It also helps the distribution side too, because they're not on their back foot explaining why these decisions are coming through months later.
Patti Harman (11:30):
We'll pick this up in just a minute. We're going to take a short break now and we'll be back in a few minutes. Welcome back to the Dig In podcast. We're chatting with Brett Laker, head of North America for Underwrite Me about how technology, especially AI is changing the life insurance space. So we were talking Brett, about how underwriters are using ai. Where do you think AI will have the greatest impact for life insurers and why? And when I say that, is it in terms of reviewing and accessing data or pricing? I think you had alluded to that a little bit earlier, but where do you think it'll have the greatest impact?
Brett Laker (12:12):
That is a good question, and I think that one that we're all trying to read the tea leaves on, and we are attempting it in different places as an industry, which is great, but I kind of boil it down to all of the pieces of whether it's underwriting and claims and product development or mortality assumptions. At the end of the day, the purpose of it is to improve the buying experience so that it's done in a way that's more transparent and understandable. And so I think that even though I want to lean into saying it's underwriting, but that's an easy one for me. But I will say I think that all of that contributes to that front end, which is if we don't have sales, we don't have companies and we don't have customers that are happy and we don't have jobs. And so I think that that's where we focus on. Now, I don't know if AI itself in the sales, other than identifying sales opportunities or cross-selling or determining whether or not somebody is in a stage that they want to buy or things like when they just had a baby or they bought a house or they coverage, that sort of thing. I think that's less on the AI. I think it's all those other pieces that get improved to make that better. And so that sounds very altruistic, I know, but I do believe that that's really where we should all be focusing efforts on.
Patti Harman (13:32):
Well, as I've spoken to different insurers, one of the reasons that they're looking at bringing AI into their procedures and processes is because they want to improve their customer service and how they interact with their clients and that sort of thing. And so that kind of leads to my next question, which is how will this change how carriers service and interact with their customers in the life insurance space? Does it change those interactions in any way?
Brett Laker (14:01):
It could. Yeah. So we're in a funny business in that your interactions are limited. You buy a product and you have it for let's say 20 years. So your action is at the sales stage, and so it's the agent and the underwriter that probably impacted the most, and then the delivery of the policy, then somebody pays for that policy, whether they're whatever timeframe it is. So whether it's monthly or yearly or a single pay, whatever the case might be, you don't really have that much interaction other than if it's a UL or something, you'll get your reports, or if it's UL who maybe change your investment strategy. So those are more opportunities for touchpoints. But if we simplify just down to see a term policy, there's no interaction except when your beneficiaries apply for the coverage when you die, that's not the best interaction you would have.
(14:50):
And I think that there are going to be other opportunities for carriers to engage more. And so we are seeing, it's not necessarily AI specific, but we're seeing health programs to get that engagement with a customer through the lifecycle. So vitality that John Hancock uses for instance, is like a Fitbit feedback. You get some scores for doing healthy living. And so what you're trying to do is, one, educate people on better living. Two, keep them engaged front and center with your brand, and the three have better mortality output. So it's all at the end of the day. So it's sort of win, win, win. And so yeah, I think that engagement is something that as an industry we need to figure out better. Even myself, I bought that policy seven years ago. How many times have I engaged with the company over it? None other than paying them every month.
Patti Harman (15:51):
Yes, true. What concerns you the most about the introduction of AI and technology into the life insurance market?
Brett Laker (16:01):
So I think there's a sense of FOMO going on for sure. There's good and bad. So there's this fear of being left behind by peers and competitors, particularly if you're looking at the C-suite and they're getting recommendations from the subject matter experts, that can be really great because it can foster a faster adoption of new innovations. However, it can also be a problem because if you cut corners on assessing the impacts and the implications, then you might trip up over yourself. So I do worry about that. I feel like we are sort of scrambling right now to try and make it fit. And I feel like the AI side of things is a tad overplayed, although it is still, the potential is so huge. I think where we're seeing the benefits are that you can, and you touched this earlier, is that there's so much data in our industry that the AI can organize it better, analyze it, and then give to the people who have to make use of it.
(17:00):
So you're taking away some of the more mundane, laborious tasks out of some roles. So I think that that's where we're sitting doesn't mean you don't get to more of a machine learning aspect, but right now we don't. And part of that is because of regulatory environment. So I say fortunately or maybe unfortunately, the life insurance industry is highly regulated. If we look sales process, the underwriting, the application questions, reserves the investment guidelines and restrictions for carriers. It's a lot of regulations. And what it has created is a very stable and trusted industry. So you can't really argue that it's been bad. But because of that, I feel like we've been slow to really make full scale adoptions of technology and changes the processes. So it's been a bit more slow and metered, whereas the PC world is a little more aggressive in some ways because they can reset prices each year. And I know simplifying things on them, and anybody in the PNC would be like, that's not how it works, but it is. And so I do think that we do need to think about the long-term implications of what we're doing. We need to be here for the customers.
Patti Harman (18:12):
I agree. When I talk to some of my other editorial colleagues, they cover different industries and they're like, oh, everybody that we're covering, they're all adopting AI. And I'll look at them and I'll say, what you need to understand is that the insurance industry is underwriting all of the risks for all the adoption of AI in these companies. That said, so they're going to be a little bit more cautious about how and where they adopt it because they have to put up those guardrails to help protect everybody else that's kind of doing that adoption, I think. Is there anything that really excites you about the ability to use AI and other technology in the life insurance space?
Brett Laker (18:52):
I struggled with this one because the excitement part of it was I do think that it is a fascinating time, particularly for me in the underwriting technology space, to see people looking at different ways to do things and trying to improve processes and trying to make their roles better. And there's a lot of pressure with that. But yeah, do I think that there's one particular thing that I can sort of point my finger to that makes it super exciting? I'd have to kind of say no at the moment. I think the potential is massive. I am still trying to figure, I myself am just doing a ton of research still. It's only been, if you roll back, it's been really about two years, right? GBT OpenAI came about of sort of a household name thing. So there is so much potential that's figuring that out.
(19:41):
Now, I will say, I think that the potential to take large amounts of data and make sense of it is probably the single most important thing in the industry. And to be able to organize medical records, pulling out all the duplications, all that sort of noise that's in there, making an underwriter's jobs better as well as actuaries and parsing through mortality data, large population statistics. I think that that's a lot of potential. Now, that's very narrow use of ai, I think would be the most exciting is if we do get to a point where we have some true artificial intelligence where it's actually making decisions, and right now is based off of what we tell it to do.
Patti Harman (20:28):
Well, GenticAI is heading in that direction, I think.
Brett Laker (20:3t3):
So that could be super exciting, but also super scary.
Patti Harman (20:36):
Oh, I totally agree with that. Where do you see the life insurance market in the next three to five years, and how do you see it changing? And it doesn't have to necessarily be with the adoption of technology, but I'm just wondering, you had said earlier that there are processes and procedures and ways of doing things that have made this just a very trusted industry, but how do you see any major changes on the horizon as such?
Brett Laker (21:07):
So I may change my answer in three years if you come back to me and say, no, I was wrong. But I think that those processes and procedures that you referred to, I think I see incremental changes and improvements to it. So massaging all of those to, because there's definitely room for improvements there. Do I see an absolute wholesale change? I don't. I think because again, that regulatory environment will probably prevent that. We have to be transparent and we have to be explainable. And I just don't know if we can get to a point where it's like, you know what? We're just going to let the machine make the decision. We still have underwriting guidelines based off of medical research based on mortality experience. So that sort of tethers us to the decision. And so you can use AI to analyze that and make the decision, but to sort of throw that away and say, you know what? Let's just sort of let the machine learn how to make the decision based off of whatever inputs we're putting into it over whatever longer period of time. I guess I don't quite see that, and I don't quite want that.
Patti Harman (22:11):
Oh, I agree. The thought of having a machine make all of the decisions is a little bit scary, I think for a lot of people. We've covered a lot over the last couple of minutes. Is there anything I haven't asked you that you think is really important for our listeners to know, either about the life insurance space or what's going on or just something that's a takeaway that you want them to have?
Brett Laker (22:38):
So I sort of answered it, but I was going to ask you, would AI completely remove the structured approach to underwriting, which was using underwriting guidelines and structure that way? And so I guess I've already answered that. I don't think it will, but that's why I think that people should be asking that question as to how we go forward with it. And then the second one was, did I use AI to develop my answers to your questions?
Patti Harman (23:07):
Great. Well, but was there anything else that you wanted to make sure that our audience knew?
Brett Laker (23:13):
No, my info is available for reaching out, but I do think that the underwriting automation we've been using in the industry, and I'm again biased because we do provide it, but there's also some other great providers out there as well. I think that those tools are the building blocks to be able to use newer technology and that we use those to process the outputs. And so I see this more cohesive path forward with what we've currently been using by the 10 years and then making that better versus like, I'll just throw the baby out with the bath water sort of thing.
Patti Harman (23:50):
It's been exciting as I've been covering the industry for a while, just to see how much the use of technology has changed the adoption, what it's able to do, how it's able to improve some of the more mundane processing and processes and that sort of thing. And I think there are a lot of exciting changes on the horizon for this industry because people tend to view it as, oh, it's insurance, and they have no idea how exciting and interesting and innovative this industry truly is because it's always changing and evolving to meet and address new risks and just new possibilities, that sort of thing.
Brett Laker (24:34):
I agree. I think that we're attracting a lot of new talent into the industry that's injecting a great deal of energy. I've met so many new younger people that are really focused on data science. The actuaries are focusing a little bit more in that there's more cross-pollination between underwriters and actuaries. So I think that that all has been extremely beneficial to the industry and it's maybe woken it up a little bit. As you said, it's not quite so stayed as it was.
Patti Harman (25:00):
Very true. Great. Well, thank you so much for listening to the Dig In podcast. I produced this episode with audio production by Wen Weis Jean-Marie. Special thanks this week to Brett Laker of Underwrite Me for joining us. Please rate us, review us, and subscribe to our content at www.digin.com/subscribe From Digital Insurance, I'm Patti Harman. Thank you for listening.