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In order to boost their bottom line, life insurance
companies are considering a new approach—using mortality management.
This revelation came to light recently at the ACORD LOMA
Insurance Systems Forum in Las Vegas,
where MajescoMastek and Transamerica Reinsurance announced the results of a
recent survey of about 50 insurers on managing mortality expenses.
New rules-based underwriting platforms and processes can help
insurance carriers reduce their mortality expense and greatly improve the cost
structure, acceptance rates, and mortality experiences of their life insurance
products programs. The majority of insurers polled base their new business
process on work flow and images as well as capturing application and evidence
in data form versus paper. Carriers are starting to consider rules-based
underwriting engines, which provide such benefits as the ability to assess
risks on a real-time basis.
“While insurers historically have not invested in tools and
processes to manage mortality expenses, that could be changing as insurers
recognize the potential to increase profits and reduce costs,” said Harold
Apple, senior vice president of VectorMastek, a subsidiary of MajescoMastek.
Transamerica Reinsurance presented such evidence for
potential savings and increased profits from a recently conducted audit. The
audit found that a company can generate $4 million in increased profit for
every $10 million in new annual premium by reducing claims expenses by 6.6
percent over the life of the block of policies. However, improving productivity
by 10 percent in underwriting and new business processing generates only
$500,000 in increased profit for the same example.
Mortality management can ensure that individual risk
decisions are made consistently with a carrier’s pricing assumptions and
underwriting guidelines; enable the predictability of mortality studies through
the capture of medical evidence in data form; and provide underwriting
management with productivity and management tools.
“Understanding and managing mortality risk will become even
more essential to a life insurer’s success as we move toward principle-based
regulation and capital markets financing solutions,” said David Dorans, vice president,
Product Consulting & Development, Transamerica Reinsurance.
Among the technologies that can improve mortality management
operational efficiencies are:
- Service
Oriented Architecture
- Straight
Through Processing
- Web-based
systems using Microsoft.NET and J2EE technology
- Communication
between provider, internal system, and client that utilizes ACORD-compatible
TXLife transactions
- The capability
to operate anywhere using a Web-based system
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