No-exam trend in Life Insurance on the rise

Andrew Mo Published: 15 December 2020

The Life Insurance industry is changing and it’s no secret that COVID-19 has greatly increased our reliance on technology this year. Fortunately, here at Life Insurance Direct we’re proudly embracing this change! Earlier in October we launched our very own Wallet app to give our customers the convenience and flexibility to access their rewards, details and benefits with ease.

On a much broader level, we are also seeing an accelerated uplift in insurers leveraging technology to cater for the rising demand in the midst of this pandemic ridden economy. Big data is playing the most prominent role in this shift as insurers are continuing to use straight through underwriting processes instead of the more traditional manual ways of evaluating applicants.

Accelerated underwriting processes rely heavily on algorithms and sets of rules which aim to fast-track healthy applicants and provide instant-answers. Given the volume of low-risk applicants that submit applications each day the information accessible through big data enables efficiencies in the approval process without the need for a manual assessment or medical exam.

However, this quick method of assessment is not without its drawbacks. Here are some key areas of consideration for you to understand the compromise between “What you gain in speed” and “What you may lose in flexibility and price.

Speed limits flexibility

A number of insurers have already adopted accelerated underwriting which can provide instant answers, quick coverage and greater convenience. However, it can also lead to a greater level of exclusions, declines or loadings due to the lack of flexibility in the rules set. While certain insurers will escalate the application to an underwriter, for a manual assessment, this is not always the case.

The more the insurer knows, the cheaper the policy will be

In general, a policy with full underwriting will always be the most accurate and oftentimes the cheapest option. This is because the insurer knows more about you and although you can get a very high level of cover without the need for a medical. The insurer can request for one due to your medical history. When insurers do not request for a medical, they can write to your doctor to ask for a copy of your file or request a doctor’s report to find out more about a particular medical condition. It is always encouraged to be open and upfront with the insurer as you need to fully comply with your duty of disclosure.

Accuracy means reliable cover

We have found applications manually assessed by an underwriter can often give the applicant a better outcome than an application that has been automatically assessed. This is because the underwriter can take a more holistic approach when considering your medical history. This will allow them to make a more accurate assessment than the accelerated underwriting rules engine. So, while it can take longer, you might find that it is worth the wait because the insurer can provide you with a better price and greater certainty.

While technology is continuing to shape the industry, it will be the insurers who leverage technology with the added holistic manual assessment of escalated, sub-standard applications that will thrive to address the changing needs of Australian families.

If you are as excited as we are about technologies in the industry, be sure to check out our Life Insurance Direct Wallet app and let us know what you think.

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