How Northwestern Mutual Embraces AI

At a time when many financial services companies are looking a bit shaky, there’s a lot to be said for stability. Northwestern Mutual, a 166-year-old financial services company based in Milwaukee, Wisconsin, has a purpose-driven mission: to free Americans from financial anxiety. One of us (Tom) was sufficiently attracted to The Quiet Company (as it once advertised itself) as a young professional that he signed up for multiple products over time despite its lack of digital wizardry. However, the organization has been on a journey to be more client-centric and to enhance its overall customer experience. To that end, Northwestern Mutual has focused on artificial intelligence and data science.

For example, in 2018, the company teamed with Milwaukee-based Marquette University and the University of Wisconsin-Milwaukee to create the Northwestern Mutual Data Science Institute. This partnership advances academic data science and technology learning while propelling innovation for Northwestern Mutual in key areas, including underwriting and AI-driven business automation. Further, it contributes to the formation of a technology ecosystem and advances its home base of southeastern Wisconsin as a national hub for technology, research, and talent development while creating an organic pipeline of tech talent in the area.

Further cementing Northwestern Mutual’s commitment to AI and data science was the creation of a centralized data organization led by chief data officer (CDO) Don Vu, who previously led data and analytics at both MLB Advanced Media and WeWork. Since Vu’s arrival in 2020, Northwestern Mutual has made progress growing its data department and implementing an enterprise data and analytics strategy that aligns closely with its goals as a major financial services organization.

AI for Underwriting

At the core of any successful insurance company is the ability to accurately assess underwriting risk. In the life insurance sector, this has typically involved sending a health professional to a potential client’s home to draw blood, obtain a urine sample, and ask a variety of health-related questions. Northwestern Mutual underwrites over 400,000 people a year, so high-quality underwriting is critical to its success.

At the beginning of the COVID-19 pandemic, home visits by health professionals simply weren’t practical. Northwestern Mutual responded to the uncertain environment proactively by leaning into its AI strategy and focusing on more effectively leveraging data to improve the underwriting process.

As a result of the effort, it accelerated underwriting decisions by using the same types of data it had historically used, but by looking at existing digital data such as lab results and medical records that were already in applicants’ medical records. This avoids home visits and having to obtain new medical samples. CEO John Schlifske said in a recent Wall Street Journal article that “we believe automated underwriting puts insurance products in the hands of consumers who need them in the easiest and least intrusive way” and that the company is aiming for half of its policies to be issued with digital data and AI-assisted decisions by the end of 2023.

AI use in underwriting decisions isn’t without its challenges: The Journal article noted that Connecticut has begun requiring insurers to certify that the way they use data is compliant with antidiscrimination laws. It’s a tricky issue because all life insurance underwriting is designed to differentiate between people based on their health and life expectancies. But automated underwriting has the significant benefit of cutting issuance time to three days from about four weeks or longer.

AI for Advisers

Northwestern Mutual has over 7,500 financial advisers and representatives. Anything that can help them do their jobs more effectively will have a big impact on the company’s success and its ability to help clients. To help the company achieve this vision, Northwestern Mutual’s data organization is developing a next best action (NBA) system for advisers that recommends financial products that can help clients achieve greater financial security.

These predictive models also help financial advisers manage their books of business by determining whether a client is likely to upgrade from a term life policy to a whole life policy, or to become a wealth management client. The system is in proof-of-concept production now and continues to be refined to meet the business’s needs.

Tools like the NBA system will be particularly helpful for new advisers and representatives. At most life insurance companies, there is a higher level of attrition among advisers at certain points in their tenures — typically under three years, then again at five years. The NBA system makes it easier for an adviser to work with clients successfully across those tenure horizons and beyond. For all Northwestern Mutual advisers, use of the system is voluntary, but there is early evidence that advisers who use it are more successful than those who don’t. While Tom’s adviser seems to have an uncanny intuitive radar for discerning when he might need a new insurance product, AI can institutionalize such intuition and make it available to less experienced advisers.

Experimentation With Generative AI

Like seemingly everyone else these days, CDO Vu is intrigued by generative AI’s potential. He and his colleagues are closely monitoring the emerging technology to see how it might impact Northwestern Mutual’s business. One area of experimentation is how AI might be able to help advisers get needed information or assist any employee by summarizing training and other internal materials based on a prompt or search query.

“We have several intranet portals across a variety of subject areas, so something like ChatGPT might be a great interface for synthesizing knowledge across all of them and getting the right information to our advisers more quickly,” Vu said. Most of the use cases would need to involve fine-tuned training on Northwestern Mutual’s specific content, so the company’s data scientists are exploring how best to do that while still being careful about having the appropriate data privacy guardrails.

Somewhat surprisingly, Vu said that many of the data, analytics, and AI use cases that would benefit Northwestern Mutual aren’t that different from those at his previous employers. In each case, the companies need to know “who the customer is, figure out how best to serve them, and help them reach their goals,” he said. Every organization wants to unlock how data can help solve business problems and is on its own maturity curve.

At Northwestern Mutual, financial strength, trust, and client service will continue to be core values. AI might be able to help it thrive, and it intends to explore the countless possibilities.