The Phoenix Cos. recently started using an automated underwriting process to save money and improve efficiency as the insurer focuses on middle-income customers compared with the very wealthy clients it served before the economic collapse of 2008.
“We went through several downgrades as a carrier which actually forced us out of the business we were in as a company,” said Don Griswold, Phoenix’s second vice president of Products and Operational Delivery.
“We sold exclusively high-net-worth products, wealth management, estate planning, all that type of stuff,” he said. “We had the largest average face amount in the industry on our life products.”
After ratings downgrades in late 2008 and early 2009, Phoenix lost some of its key distributors, including State Farm. The company had to come up with a new strategy, which eventually led Phoenix to sell life insurance to middle-income families.
The company’s underwriting system had required a lot of direct contact between the insurer and its clients. It was too expensive to sustain, Griswold said.
“It’s OK when you’re getting a $200,000 first-year premium, but when you’re now going into a business where your average first-year premium is less than $1,000, that particular model doesn’t work anymore,” Griswold said.
Phoenix contracted with StoneRiver Inc. of Oakland, Calif., StoneRiver announced Tuesday. StoneRiver provides insurance technology and related services, including automated underwriting.
StoneRiver’s LifeSuite system is a faster, computerized method to determine a life insurance applicant’s eligibility more quickly than having an individual underwriter handle each case. Underwriting decisions can be made during a single phone call, instead of taking longer in a manual system.
The key product driving the need for automated underwriting is life insurance to pay for a person’s final expenses, Griswold said. Compared with large life insurance policies used to transfer wealth from one generation to another, final-expense policies have a much smaller face value.