The rate of change is accelerating across our business and in industries that impact our business. What has made us successful in the past is not going to be sufficient for us to thrive into the future. The advances we see in computing power, digital data, artificial intelligence, genomics, consumer engagement approaches and precision medicine are staggering, and this is just the beginning. Innovation is driving transformational change and forcing us to reimagine the future of life insurance underwriting, what we call Underwriting Reimagined®.
In 2019, we put forth a vision of the future of underwriting that was centered around three key tenets. Those are that the future will
- be data driven
- require organizational agility
- be tied to social responsibility.
This article explores the topic of social responsibility in more depth, as 2020 has been a reminder in so many ways of the importance of social good being represented in a corporate value system.
What is it? What does “social responsibility” mean?
Social responsibility in this context means that a company considers the long-term impact it has on society, and it establishes an outlook that considers this long-term purpose, creating an ethical balance between striving for profitability and benefiting society as a whole.
While this is a topic of increased importance to young professional beginning their careers (2017 Decoding Gen-Z survey sponsored by Talent Egg showed 46% of young job seekers said they look for social responsibility initiatives when searching on an employer page), it has also been recognized by market leading investment advisors as a necessary mindset for successful growth and profitability.
It is important first to recognize that life insurance really does inherently serve a societal need. Having finances to draw upon while dealing with the untimely death of a loved one is critical for dealing with the practical implications. Trying to handle the emotional implications without those financial resources simply compounds the already great stress of losing someone.
Whenever we see a crowd-funded memorial as the sole means for a family to bury their loved one or pay their rent or buy groceries, that is a failure of our industry. It is for these things that life insurance exists. We need to find ways to educate people on the social need that life insurance serves and make it relevant and desirable to them.
From a consumer perspective, studies show that presenting insurance as a risk pooling mechanism where the consumer’s premium payments may benefit others in need and not just a transactional purchase increases the engagement of the prospect1 and, in fact, that social responsibility is one of the key motivating factors for purchases made online.2
How does it apply within the Life insurance domain?
A great example of social responsibility in action, and one that makes me proud to work for SCOR, is when we strengthened our commitment to a sustainable investment strategy supporting climate awareness.3
More directly involved with my role as Head of Underwriting Innovation, though, is how social responsibility intersects with the underwriting discipline. As the evolution of new medical advances and new technologies continues, our industry must be proactive about making sure that these advance and technologies are adopted in a socially responsible fashion.
A few examples demonstrate the risk of failing to be socially responsible when we can. One way that social responsibility plays an important part in the future of the life industry is in the area of Health and Wellness. Life insurance has always fulfilled a vital role in lives of its customers to reduce risk or protect against the unexpected, but direct writers are now looking for ways to engage customers to live longer, healthier lives with health and wellness programs.
Moving from passive risk assessment to actively helping people reduce their risk increases the value of the life insurance application process and increases the value a consumer places on their relationship with their insurer.
In the area of Artificial Intelligence (AI) there are news stories almost weekly about algorithms gone awry, whether that is in the area of COVID-19 vaccine distribution4 or discriminatory use in health care5. AI is an extremely powerful tool but subject to the biases of the data used to create it.
If we can use the power of AI successfully, we can improve the customer experience of buying life insurance, we can find ways to extend protection and peace of mind to more people, we can even improve prices. However, we have to be able to do this in a way that demonstrates that we are conscious of, and actively working to avoid, the pitfalls associated with predictive analytics.
The NAIC has proposed6 (and the ACLI has supported7) guiding principles for AI. Those are that models should be fair and ethical, accountable, compliant, transparent and secure. The guiding principles are designed to provide a framework for our industry to harness the power of artificial intelligence in a socially responsible way. Being able to explain what drives predictive model outcomes and ensuring those outcomes are free from unethical bias is important work for us as we build these capabilities.
What do industry commentators say?
A McKinsey report offers three core priorities the life insurance industry can address to reimagine how it fulfils its “vital role in customers’ lives.” First, top companies will personalize each element of the customer experience (through the power of AI), with particular opportunities in targeted health management, continuous underwriting and omnichannel journeys.
Second, insurers can design flexible product solutions that respond to today’s difficult interest-rate and regulatory landscape. Third, they can reinvent capabilities through upskilling/reskilling their workforce, leveraging in-force and closed blocks as a source of value creation and driving effective M&A strategy.
Embracing social responsibility as a cornerstone of what life insurers do and how we do it is a necessary step in this evolution of our industry, as is working with regulators on the benefits these tools can bring and how their risks can be mitigated.
References
1 Millennials &G Modern Insurance, pp. 43, 46. http://go.cakeandarrow.com/millennials-modern-insurance-report
2 https://www.coverager.com/the-five-elements-of-modern-insurance/
3 https://www.scor.com/en/sustainable-investments
4 https://www.technologyreview.com/2020/12/21/1015303/stanford-vaccine-algorithm/
7 https://www.acli.com/Posting/NR20-020
