It seems like everyone today is talking about ChatGPT and how it’s going to revolutionize almost every business sector. The life insurance industry is certainly no exception, and we can expect big changes in the coming years to how customer service, underwriting, claims processing, and risk assessments are conducted.

Yet beyond all the hype, questions remain as to how life insurers can properly leverage ChatGPT and other AI tools in the underwriting process.

Some argue that the best approach is to focus on automating the more mundane underwriting tasks such as data analysis and risk pattern identification. These are tasks that ChatGPT can be very helpful with thanks to its ability to process large volumes of text data.

However, I want to examine another area in which ChatGPT can be used: the field underwriting process.

Field underwriting

Field underwriting

Field underwriting is something of a lost art. At one time, almost every carrier practiced it via field agents who would go door-to-door and talk people through the importance of acquiring life insurance.

These agents weren’t just selling policies, they were also gathering intel on a prospect’s finances, household situation, and general health. With this data, easily obtained through observation and a few tactful questions, an agent could determine an appropriate coverage class for an applicant and make a preliminary decision on insurability.

It was a good system that ensured no one’s time was wasted. Agents were able to secure a new customer whom they could be confident of underwriting and customers received policies that were suited to their situations.

Bob Gaydos – Founder and CEO of Pendella

However, beginning in the mid-1990s, underwriting costs began to spike, resulting in declining profit margins and a corresponding decline in the number of field agents. Today, field underwriting is still practiced, but only when an agent can be confident of collecting a high commission from a wealthy prospect. The vast majority of ordinary middle-income individuals are not being assessed as the profit margins are just too low. 

Most insurance agents recognize the value of field underwriting and regret its decline. They just don’t know how to bring it back in a world where everything is done online and door-to-door salespeople are all but obsolete. Enter ChatGPT.

Digital field underwriting through ChatGPT

Digital field underwriting through ChatGPT

In the life insurance industry, the most critical customer data remains the same: financial, household, and medical data. Yet with the demise of traditional field underwriting, most underwriters are now sourcing this data after a customer has already made a policy application.

An underwriter can’t be certain that the customer has been placed in the right product class, which can result in lost time, policy rejections, and frustrated customers who lose any interest in continuing with the process.

But here’s the thing. There’s no reason you can’t gather most of the required underwriting data before the customer makes an official application. AI-powered chatbots hold conversations with prospects in much the same way that a human field underwriter would do in the old days (see How AI Technology Can Help Insurers Enhance the Customer Experience?).

These chatbots can respond in real-time to customer queries, ask questions, and advise customers on the insurance policies that are most suited to them. It’s field underwriting for the digital age.

How AI Technology Can Help Insurers Enhance the Customer Experience

Now, does this mean that a carrier could potentially automate its entire underwriting process? No, human underwriters will still be needed for assessing some applications that exceed certain risk factors. But turning over the data collection to an AI program like ChatGPT can ensure that underwriters have all the information they need once an application lands on their desk.

They also get the confidence of knowing that an applicant has been placed in the right risk class, resulting in fewer complications and rejections.

As a final point, carriers that really want to get the most out of ChatGPT need to look at how it can not only make their current work process more efficient, but also expand their market penetration. Currently, there’s a massive gap in the insurance market: only 52% of Americans have a life insurance policy. The industry as a whole won’t be able to grow unless it can start reaching these uninsured people and ChatGPT can make that task a lot easier.

Final thoughts

The digitization of life insurance is an ongoing process, one that’s been long overdue for many years.

ChatGPT can make an underwriter’s job a lot easier and while it does have multiple applications, I believe its most effective use case will be in customer data collection and engagement.

At the end of the day, field underwriting doesn’t need to be a difficult task, and there’s no reason to think an AI program can’t do it for us.


AUTHOR: Bob Gaydos – Founder and CEO of Pendella

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