Template for growth
Will Grid’s new industry-wide service standards and quotation templates commoditise the sector? Edmund Tirbutt investigates
Although no exact details are yet available, the primary aim of the service standards charter is to set out basic intended timelines that intermediaries can expect for the provision of quotes, invoices and other communication from insurers. The quotation templates show intermediaries what they need to ask for when applying for quotes on group life, income protection and critical illness cover and explain the reasons why.
Grid spokesperson Katharine Moxham says: “The markets generate a plethora of different standards with regard to quotation requests. At one extreme intermediaries can give very precise details of salary, benefits and full claims experience whilst at the other they can submit a one line email requesting a quote for four times salary. Because of these discrepancies different insurers are quoting different terms. But the idea is to have a level playing field.”
Richard Colver, value proposition director, Willis Employee Benefits says: “Given the history in the risk market for periods of poor service from some insurers I believe that providing a minimum service standard in support of the group risk market is excellent as long as it does not become a lowest common denominator.
“For the smaller end of the brokerorientated risk market, data templates will hopefully have the effect of removing re-work costs which in turn will bring down the quotation unit cost for insurers. For the larger more complex risks bespoke market presentations will still be required”.
The new facilities, which apply to both new and renewal business, have been produced primarily for the benefit of non-specialist intermediaries to help them achieve customer certainty, and hopefully also to encourage them to grow the market. They have been developed by Grid’s Raising The Standards working group, which is also currently looking at data encryption issues and at ways of standardising consent forms so that medical evidence can be shared between advisers for cases above the free-cover limit.
Because the work has been done largely by working group members who have given up their time and expertise voluntarily there has been no significant cost involved, thereby largely bypassing the thorny issue of why specialist intermediary Grid members should be helping to fund increased competition from their more generalist counterparts via their membership fees.
Indeed, even specialist intermediaries who have left Grid because they felt unable to justify the costs of membership express broad approval for the initiative, albeit accompanied by the odd caveat. Simon Derby, director at i2 Healthcare, whose firm withdrew from Grid in 2009 as a result of what it considered an unreasonable fee hike, was in fact one of those to originally kick off the service standardisation process.
He says: “I think it’s a hugely positive move as we need some standardisation to hang our hats on, especially if we are going to be attracting new intermediaries in. But, although we don’t yet know exactly what the Grid wordings will contain, I would imagine that it would be difficult to get the standard terms to apply to SME business done via online systems offered by the likes of Canada Life, Unum and Friends Life.
“The same issues probably arise with Ellipse and with Unum’s Select product, which is a completely different animal and is accessed via its own online system. So, although the Grid documentation may be useful for manual quotes, generalist intermediaries may still have to learn the ins and outs of other systems.”
Mike Izzard, managing director of Premier Choice Group, which also left Grid over the fee hikes, describes the quotation templates as an “interesting innovation.”
He says: “I’m against commoditising anything to do with group risk but this is really semi-commoditising and I think it has got the balance about right. But, whilst it will make life easier for existing dabblers, I still don’t think it will persuade many new intermediaries to join the market.”
Feedback from Grid members combines similar broad support with suggestions that the initiatives may fall short of attracting floods of new intermediaries into the field.
Jon Ford, operations director at Canada Life, who is a Raising The Standards working group member, feels that avoiding the “back of a cigarette packet type quotation requests” from non-specialist intermediaries won’t necessarily make rates cheaper, but should help ensure that the right rates are on the table. This will enable correct underwriting decisions to be made at the quotation stage and avoid the need for last minute underwriting adjustments.
Fellow working group member Steve Bridger, who is head of group risk at Aviva UK Health, says: “In itself it probably won’t grow the market but anything that raises awareness and accessibility of what we do can only be a good thing should the market open up, which we are hoping will result from the publication of the findings of the government’s review of sickness absence this autumn.”
John Dean, director of Punter Southall feels the onus is very much on intermediaries to invest heavily in platforms (See Box 1). But Steve Ellis, operations director, group protection, at Legal & General doesn’t feel this is necessary. He points out that by the time his company’s new back office processing system is linked to a new portal being launched next year it will be accessible by any intermediary without them having to invest in technology.
On the other hand, Chris Ford, director of group risk at Jelf Employee Benefits, feels that platforms must be employer-led and emphasises that his firm will use technology to help a client but not necessarily an insurer. He says: “Employers have payroll systems and the trick for providers is making it easy to bring information from the employer to their own back office systems.”
It would take a hardened Luddite to criticise insurers for wanting to make the process better providers will now have to wait and see if the doubters are proved wrong. Specialist group risk intermediaries on the other hand feel they have nothing to fear.
The decline in group risk service standards is sometimes blamed entirely on the spate of mergers and acquisitions in the opening years of the 21st Century and on the 2003 exit of Swiss Life, whose book was widely dispersed amongst the remaining players. But service was in fact never that impressive in the first place.
Nick Homer, proposition development director at Zurich Corporate Risk, says: “Things were at their worst following the Swiss Life exit because it had a lot of business but they were never too good before that. Previously it was almost accepted that business was sold in a consultancy manner and that there were no immediate transactions.
“I’m not sure that it resulted in customer detriment at the time because expectations weren’t the same. But now expectations have changed and there is a greater requirement for transparency of process, speed of transactions and clarity of terms. In the era of contract certainty it’s important we ensure that customers are clear on what cover is being provided and the costs of it at the earliest opportunity.”
Fortunately, insurers seem to have been taking these messages on board. According to the ORC Group Risk Track Survey, which has
been running for four years, there has been a general upturn in service delivery across the whole industry consistently year-on-year in
terms of both quality and timely delivery.
EFFICIENT THROUGH ECONOMIES OF SCALE
John Dean, director of Punter Southall says insurers and intermediaries simply have to become more efficient to reduce costs for their products to become more attractive. So, whilst he acknowledges that it is useful for Grid to provide some standardisation, he feels that this is really just the tip of the iceberg.
Dean says: “Historically there has been a problem with the fact that there is a whole plethora of people in insurer and broker back offices checking accounts and underwriting and pushing paper around when all this should be being done on a computer platform which clients can access themselves. The only way to drive change is via brokers, as they are the voice to the client, but unless they are really specialist and willing to invest half a million pounds plus on new platforms they won’t make any progress.
“Over five years such a new platform is likely to pay for itself for a medium-sized broker but not many of them are likely to shell out this
sort of money in the current economic environment. So whatever Grid does or doesn’t do is unlikely to make much difference. I reckon in a couple of years’ time around 10 intermediaries will be accounting for around 80 per cent of all group risk business.”