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Need life insurance? There's an app for that.

The Internet is making serious inroads into the life insurance business, especially when it comes to term-life policies. Florida is just one of the many states where insurers are expanding their e-underwriting processes. It's certainly faster, but consumers need to keep a few things in mind before they rush to the web.

The life insurance application process can take a while. First, there's the application with all the medical history questions. Then there are the blood and urine tests. And then? The waiting. To complete the underwriting process, the insurance company gathers medical records and determines eligibility and premium. All told, the process can take as long as six weeks.

With e-underwriting, insurers are hoping to cut that six weeks to six minutes. One company originally told its agents that the computer program would take about 15 minutes to produce an underwriting decision. An executive with the company says that a decision takes no more than nine minutes almost 100 percent of the time.

Companies developed the software in response to a declining market for term-life policies. Industry data says that sales dropped 12 percent last year, the largest decline since 1986, the first year for which data was available. Sales of all types of life insurance policies dropped 45 percent between 1985 and 2009, even with a 25 percent increase in the number of households with children. Especially over the last few years, potential policyholders have been trimming budgets or relying on employer-sponsored insurance plans, or both.

In our next post, we'll discuss a few things consumers should keep in mind when considering e-underwriting policies.

Source: Wall Street Journal, "Would You Buy a Life-Insurance Policy From This Machine?," Leslie Scism, 03/12/11

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