How Blockchain Technology and Marijuana Decriminalization Are Changing Life Insurance
Last week we looked at how the emergence and evolution of biometric technology are changing the face of the life insurance industry. Through wearable devices, facial recognition software, and other biometric-based developments, many carriers are embracing the future. However, biometric tech is only ONE of the many game changers that agents and advisors should keep on their radar. Two other factors—one technological, the other social— could also impact your business.
Blockchain and Life Insurance
Where the Internet was the portal that brought the industry from paper-based to automated processing, Blockchain technology looks to be the next “big thing” in the world of finance and life insurance.
Blockchain is a virtual series (or chain) of blocks containing data. It was initially developed as a way to keep track of Bitcoin transactions. Whenever a transaction is made, a new block containing a timestamped and encrypted record of that transaction is added to the chain. Anyone involved in the chain can view the data in each block. However, no single party can alter, or tamper with the records. The transparency and security of Blockchain could be the solution to many of the industry’s problems that bog down the life insurance and finance industries. Specifically, blockchain can help with longer turnaround times and fraudulent claims.
Streamlining The Death Claims Process
When a person dies, the hospital enters all relevant information about the deceased into the chain. That information is then immediately available to all involved parties. The death claims process can be streamlined into a unified system that drastically reduces the burden for the beneficiary. What takes anywhere from two weeks to six months could be done in a matter of days using Blockchain.
Blockchain technology can benefit carriers by significantly reducing fraud risk. An estimated 10% of claim costs are attributed to fraudulent claims. As a shared, yet secure ledger, everyone involved in the chain can view and audit any updates in real time, making it much more difficult to falsify information or otherwise commit fraud within the network.
Like the innovations in biometric tech we explored last week, Blockchain is still in its infancy. That said, more and more carriers continue to adopt a beneficiary/consumer-focused approach to their business. This sort of streamlined and modernized systemcould easily become the next industry standard.
Marijuana and Life Insurance
Another real-world revolution that is already leaving an imprint on the life insurance industry is not tech-based but rooted in social change.
As of this year, more than half of the United States has passed pro-marijuana legislation. Legal reforms at the state level have resulted in widespread changes for multiple industries. This includes life insurance.
The way in which life insurance companies handle marijuana reforms is just as varied as the states that enacted them. Many carriers will still raise premiums or decline coverage for applicants who test positive for THC. Others are responding with more lenient policies of their own. However, nearly all still require applicants to undergo a medical exam that includes blood and/or urine tests.
More Options for Marijuana Users?
Regardless of why they use (medicinal or recreational), you should encourage your client to be honest when applying for coverage. This has less to do with the legal issues surrounding marijuana and more to do with health factors. According to a survey by Munich Re, only 29% of underwriters said their company classifies marijuana users as non-smokers. The majority of carriers out there do not differentiate between marijuana use and tobacco use when pricing policies. And despite alternate forms of use (edibles, vaping), there is little consideration given by carriers as to how the applicant consumes marijuana.
Frequency and reason for use can make a difference for some companies. How often does the applicant smoke? Is there a legitimate medical reason for their use? If an applicant admits to using for medicinal purposes or carries a prescription for medicinal cannabis, the carrier may base rates on the medical condition. For the recreational user, someone who uses a few times a month is going to get a much better rate than a heavy user. Either way, it’s likely that an applicant who admits to or tests positive for any use will pay the same rates as a tobacco user.
Life insurance carriers are individualistic in their reaction to the changing tide of marijuana regulations. Some are adjusting, while others still adhere to longstanding policies. Will pro-legalization lobbyists and changing attitudes see more carriers taking a relaxed stance on marijuana? That is a question only time can answer.