Data Dialogue Seminar
Thursday, October 27, 2016, 11:45am, Gross 330
Lawrence Blakeman, Sukyana Chaudhuri, Gaurav Gupta (QuaEra Insights)
Candor of Life Insurance Applicants

Abstract:

Life insurance carriers need to assess the level of mortality risk associated with each applicant. The level of risk is determined best based on health conditions along with other factors like age, gender and smoking habits. Traditionally, blood and urine tests have been performed to identify existing conditions including tobacco usage of applicants. Smoking or using tobacco in any form is considered a key factor in the level of mortality risk.. Given the increased mortality risk driven by tobacco usage, it is important for the carrier to be able to identify smokers. Cotinine testing is ordered by the insurance carrier as the only “sure way” of evaluating tobacco usage. Cotinine tests are expensive and time consuming. In addition, an increasing trend among insurance carriers is to not order any lab tests for lower age groups and low face amount policies. In the absence of cotinine tests, the applicants know that the answers on the applications are the only source of information and hence may tend to misreport their actual tobacco usage habit. Because of the significantly higher prices charged smokers, there is an incentive for applicants to lie on the application form. The insurance carrier wants to understand the true tobacco habit and the level of candor of the applicant based on other self-reported data on the application form and possibly some publicly available data and third party data sold by data aggregators. The proposed approach should lay out specific data science approaches along with a list of data sources needed for this approach. This may be linked to not just tobacco habits but overall candor of the applicant.

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