Criminal Data for Life Insurance: Manage Mortality Risk with Industry-Leading Criminal Records
July  2017

“Over the past 20 years, authorities have made more than a quarter of a billion arrests, the Federal Bureau of Investigation estimates. As a result, the FBI currently has 77.7 million individuals on file in its master criminal database – or nearly one of every three American adults.”
– The Wall Street Journal, August 18, 2014

As life insurers integrate electronic data into their underwriting process, they are finding important protective value in criminal history checks.

Individuals with a criminal history apply for life insurance more frequently than may be realized, and since there is a strong stigma attached to criminal history, individuals have a strong incentive to conceal this information.

We know that mortality experience is less favorable on individuals with a criminal history than those with a clean record. Much of that extra mortality is often attributed to drug and alcohol issues that are strongly correlated with arrest records. However, there appears to be an equally strong incentive to misrepresent those histories as well. If nothing else, a reliable screen for criminal history may serve as a flag to inform the selection process of the need for more detailed data.

One study finds that individuals with a criminal record have twice the relative risk (RR) of death of non-offenders. For example, males with a record of use/possession of drugs and a prison record have an RR of 11.9. Males with a drug record but no prison record have a 6.9RR.1

Yet, until recently, life insurers have had no way to systematically acquire, review and interpret criminal history information for use in rating and risk selection. Routine background checks – part of most underwriting processes – typically only access local records (county of residence). National searches, which yield significantly better results, have not been readily available.

However, with electronic data available from third-party providers, life insurers now can quickly and systematically obtain complete criminal history checks on all applicants. Because of its relatively low cost, this underwriting evidence delivers significant protective value, especially for accelerated underwriting programs.

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The advantage of electronic criminal history checks is they match applicant information to national criminal records, including data from court sources and departments of corrections. These comprehensive databases close the information gap that is common in criminal history checks used in the past. Findings can be used to exclude or more accurately rate individuals with certain criminal history violations.

The thoroughness of electronic criminal history checks, combined with its affordability, provide protective value to life insurers that is, quite simply, too good to pass up.

Evaluating Criminal History Data Providers

One very effective criminal history database is Sherlock, created by Explore Information Services. SCOR conducted a close evaluation of Sherlock when looking to build criminal history data into Velogica, our automated underwriting solution. The service, which is compliant with the Fair Credit Reporting Act, matches customer information to national criminal records and returns a classification code that categorizes the offense, along with the date, description and disposition.

SCOR technology specialists have integrated Sherlock into the Velogica infrastructure so that clients can automatically access criminal data and factor it into an instant underwriting decision.
Because of the risk involved in assigning a criminal record to an individual, Sherlock performs a careful and conservative match incorporating the full name and date of birth. Individuals with common names are run through a supplementary validation process using geo-location to eliminate the risk of “false positive” matches.

For more information on SCOR’s research on the protective value of criminal history, feel free to contact me. For more on how SCOR’s Velogica solution has integrated criminal history checks into its automated underwriting algorithm, please contact Mark Tulbert  or Ken McNair.

 

References
1 “Relative Mortality among Criminals in Norway and the Relation to Drug and Alcohol Related Offenses” Skardhammer and Skirbekk – PLOS Nov 2013.