Life insurers have long been at a competitive disadvantage compared to other financial providers because-in many cases-they do not close sales at the time prospects indicate their intent to buy. Instead, they have to wait for prospects to undergo paramedical exams, for physicians to submit attending physician statements, and for their own underwriting processes to be completed. This delay has numerous adverse consequences. It makes life insurance difficult to distribute successfully on the Internet or via telemarketing. It also makes life insurance difficult to distribute through banks and other financial intermediaries. Sometimes these organizations consider collecting bodily fluids at the point of sale in order to speed up policy issue, but this practice is not palatable to many.

As banks and other intermediaries play an increasing role in life insurance distribution, the pressure on the life insurance industry to speed up underwriting grows. Thus, the Internet-based automated underwriting services of e-Nable.com Corporation, a subsidiary of the Medical Information Bureau, are of particular interest. Minnesota Life is one insurer that exploits these services. To understand the importance of these services, one needs first some background in life insurance underwriting.

An Underwriting Primer
Fluid collection is the major source of the delay in life insurance underwriting. Therefore, one way to decrease underwriting time is to find alternative reliable indicators of health and other insurability factors. For a number of years, insurers have used information stored at the Medical Information Bureau to obtain indicators of health. In recent years, they have had automated access to MIB’s records.

The Medical Information Bureau (MIB), Westwood, Massachusetts, is a not-for-profit association of approximately 600 insurance companies. When an underwriter at a member company sees an insurance applicant (for life, health, disability, or long-term care insurance) with a condition that might affect his or her risk classification, the underwriter reports this information to the MIB in the form of a code.

MIB has 230 codes for medical conditions. Some apply to height and weight, blood pressure, ECG readings and lab test results, but only if these facts are considered important indicators of health or longevity. There are also five codes for non-medical information that might affect insurability. For example, there are codes indicating poor driving records and participation in hazardous sports or aviation activity. Most life insurers routinely check the MIB records of insurance applicants. Automated access to MIB records has allowed insurers to cut the traditional turn-around time for life insurance underwriting from 4-6 weeks to 7-10 days (for jet issue policies). However, compared to the time it takes someone to activate a credit card, 7-10 days to underwrite an insurance application is a long time.

MIB rules bar life insurers from making underwriting decisions solely on the basis of MIB data. This information is far from comprehensive. On average, only about 15 out of every 100 applications results in a record being submitted to MIB. Privacy protection laws and regulations limit life insurers’ automated access to more comprehensive sources of medical data. Thus, although automated access to MIB records cuts some of the delays in the life insurance underwriting process, it does not cut all of them.

Cutting Turnaround Time
With automated access to health information strictly limited, life insurers once feared that they would never be able to cut the turn-around time on life insurance underwriting significantly. However, recently they have discovered some promising ways of working around this problem. In most cases, individuals with medical or other conditions affecting insurability know that they have these conditions. They know that they smoke; they know that they enjoy skydiving; they know whether recent medical exams found evidence of heart disease or cancer. Thus, if an applicant supplies truthful information on the insurance application, the insurer can be confident that it presents a highly realistic portrait of the individual’s condition.

The problem then becomes how to tell whether someone is telling the truth. In recent years, some insurers have begun to try to use credit and driving records as indicators of honesty. The beauty of credit and driving records is that they, like MIB records, can be accessed online automatically. Such records may have some predictive value (although at this writing, no independent published studies have established that fact). A person who has a bad credit rating and a history of motor vehicle citations may also be less than candid in responding to the questions on a life insurance application. Thus, an insurer with automated access to credit, motor, and MIB records can engage in real-time life insurance underwriting at the point of sale in a number of cases.

It is likely that a person’s bank records can also yield-to the degree the law permits-information relevant to the life insurance underwriting decision. For example, a history of frequent overdrafts may have predictive value. Bankinsurers and bank distributors are well positioned to apply such information in real-time underwriting.

Thus, the ability to use alternative sources of information as indicators of the honesty of life insurance applicants can have a major impact on insurance application turn-around time. In so doing, it can have a major positive impact on life insurance sales.

Insurance e-Nable
The new Internet-based Insurance e-Nable™ services from e-Nable.com Corporation, MIB’s subsidiary, permit access to this alternative information, as well as traditional underwriting information. In so doing, it allows real-time life insurance underwriting. Specifically, it provides automated access from the point-of-sale to MIB records, credit reports, motor vehicle reports, other third-party data, the insurer’s own underwriting rules, plus automated ordering of paramedical exams and attending physicians’ statements in cases where they are desired.

e-Nable Connect™ allows the transmission of an electronic application from the point-of-sale through the e-Nable.com System to an insurer’s new business system. e-Nable Alert™ receives the electronic insurance application from the point-of-sale into the e-Nable system, which runs the real-time MIB Checking Services.

e-Nable Alert™ indicates whether or not an MIB record was found. This information is then transmitted back to the point-of-sale. At the same time, the electronic application, the underwriting decision, and any MIB information are transmitted back to the carrier's new business system via the existing MIB network.

e-Nable Decision™ does what e-Nable Alert™ does and also applies underwriting and operating rules as determined by a participating insurer.

e-Nable Decision Plus™ does what e-Nable Decision™ does and also provides real-time access to such outside data as credit reports and motor vehicle reports.

e-Nable Exchange™ does what e-Nable Decision Plus™ does and also permits insurers to identify, order, and monitor the status of such underwriting services as paramedical exams and attending physician statements.

About e-Nable.com Corporation
In October 2000, e-Nable.com Corporation received $4 million in funding from Dallas-based Tobat Capital, a venture capital firm specializing in e-finance. In January 2001, it also received an equity investment from Hooper Holmes, a nationwide provider of paramedic services and call center outsourcing services. The Insurance e-Nable product suite can accept digital signatures on automated applications. The company has a number of alliances with other software companies, including FIPSCO, a Fiserv subsidiary. Fiserv is a major provider of bank data processing services and systems support in bankinsurance distribution arrangements. FIPSCO provides sales illustration software that can be integrated into e-Nable.com services.

e-Nable.com’s Web address is www.e-nable.com. The firm has other insurance customers including ING, Baltimore Life, Federated Insurance, GeneraLife, Allmerica Financial, and Starmount, as well as Minnesota Life.

A Role in Bank Distribution
Minnesota Life, a major distributor of life insurance through financial institutions, recently announced a new 10-year term life insurance product called CustomQuote targeted at that market. This product appears to capitalize on e-Nable.com’s capabilities. Frank D. FitzPatrick, Minnesota Life vice president, Financial Services, says that qualified consumers can buy the term life product over the phone in about seven minutes. Applicants who do not qualify for automated underwriting are approved in the usual manner. CustomQuote has a level premium for 10 years, after which it is adjusted annually through age 95. It also offers an accelerated death benefit, a whole life conversion option, and an optional $100,000 accidental death benefit. It can be purchased with face amounts from $50,000 to $500,000.

If the bank role in U.S. life insurance distribution grows over the coming years, products like Minnesota Life’s-backed by services like e-Nable.com’s-will be the reason.

If banks find that they can issue high volumes of life insurance underwritten almost entirely on the basis of third-party data, they also may begin to decide they no longer need life insurance company suppliers. Bankers interviewed in the late 90s told this writer that when they entered the life insurance business, they did not want to imitate traditional life insurers. Instead, they wanted to imitate credit card companies-and industrialize the life insurance underwriting process. They now have a way to do so. Life insurers that wish to preserve their own role need to build an automated underwriting infrastructure that is not easily duplicated. They also need to be aggressive in searching for alternative insurability indicators.

NOTE: This CyberTalk article, which appeared in the April 2001 issue of Resource, should have indicated that the Medical Information Bureau bars its members from making underwriting decisions based solely on MIB data. Its 600 life insurance company members abide by this rule.