Life insurance carriers face a lot of tough challenges. Unfortunately, many of these challenges have grown so large that no one life insurance carrier or technology company, no matter how market-dominant, will be able to successfully address them alone. Partnerships across entities, both inside and outside of the industry, have become a common way to drive innovation forward for carriers and consumers.
A Jumbo-Sized Challenge Solved Through Collaboration
Jumbo treaty violations are a prime example of a challenge that has surpassed the ability of any one life insurance player to address. Only 2% of all in-force falls into the jumbo risk category, but that small slice of the pie represents $72 billion in risk industry-wide.
For carriers, the risk of jumbo treaty violations increases every year as they issue more and larger policies. Individual policies themselves may not surpass jumbo treaty limits, but other in-force and applied-for policies must also be considered.
To solve this challenge, TAI partnered with MIB, an industry leader in data insights and digital solutions for risk assessment. The goal was to develop a new tool for identifying potential risks related to jumbo limit breaches well before claims time. But it wasn’t just our collective brain trust that allowed us to address the jumbo challenge; the end result was a collaborative effort involving nearly the entire industry.
Bettering the Industry Together
To solve the jumbo challenge, we needed to find a way to address a vital blind spot for underwriters: the inability to know how much coverage an applicant already has or has applied for through other carriers.
The MIB Insurance Activity Index (IAI) collects data on new application activity for nearly 100% of applied-for policies in North America. While the IAI can narrow the blind spot, it still doesn’t tell underwriters anything about in-force policy coverage. Roughly 95% of jumbo violation risk is concentrated in 25 major U.S. carriers. Since TAI provides administration services for 24 of these carriers, the opportunity to help create a data vault to support the MIB Jumbo Service became clear.
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The importance of industry involvement in an endeavor like this can’t be understated. We’ve probably all seen solutions developed without industry input. No matter how brilliant the developers are or how creative the solution is, they fall short of truly tackling the root cause or wider-spread impact.
MIB has a long history of helping its members address underwriting risks with expertise across several areas, including mortality, fraud protection, and technology. TAI also has significant experience developing best practices from what we see in terms of global reinsurance programs. Our solutions consultants help clients optimize reinsurance administration processes and their use of technology. Together, we were able to leverage our joint expertise and bring the right mix of key players to the table during development to create a solution designed for the industry and by the industry.
Read more: Agile Innovation: How MIB Delivers Value for the Life Insurance Industry
TAI and MIB also brought industry neutrality to the table. Imagine any one of the 25 carriers trying to solve the jumbo treaty challenge themselves. No matter how large they are, no matter how much they invest, they’d need to create long-lasting, collaborative relationships with 24 other significant market players, all of whom will be concerned about sharing proprietary information with a competitor. On the other hand, TAI and MIB are trusted by these carriers and already have the safeguards in place to prevent proprietary or confidential information from being divulged during underwriting. This positioned us well to help drive the initiative forward that serves the entire industry.
Find out what’s next
The MIB Jumbo Solution is being well-received to date and this is just the start of what problems can be solved by gaining access and visibility into a comprehensive industry data vault. Subscribe to the TAI blog to follow our progress as we explore potential opportunities for predicting lapses, insights into purchasing patterns, and other applications across the insurance value chain.