Date of Completion
Early duration claims, which are defined as claims that are filed within the first five years of a life insurance policy's issuance, are a large potential risk with high costs that life insurers remain exposed to, yet there has not been any significant advancement on how to properly budget for these claims. The early duration claims model seeks to address this problem by creating a more thorough underwriting procedure that specifically assesses an applicant’s likelihood of early death. The underwriting questions aim to capture risks that are not assessed by the current life insurance underwriting process and may be utilized in auto insurance underwriting, because automobile accidents are a leading cause of early duration claims. The underwriting results are used as inputs in the model to derive an early claim duration risk score from an adjusted mortality rate, which is calculated from this more holistic risk assessment. The risk score is ultimately correlated with a policyholder’s propensity to risky behavior, with more risk averse policyholders receiving a lower risk score and more risk preferring policyholders receiving a higher score. This risk score can then be utilized as a criterion for an applicant to receive accelerated underwriting through the calculation of an acceptable risk score confidence interval.
Howe, Jessica, "Predicting the Unexpected: Applying Advanced Underwriting to Accurately Predict Early Duration Claims in Life Insurance" (2020). Honors Scholar Theses. 674.