As any protection provider or adviser will know, the customer’s experience during their application process is hugely important in turning the would-be-covered into fully-fledged on risk. In the customer’s mind, once they have made the decision to get cover, the chances are they want this protection as soon as possible.
In recent months we have seen a number of initiatives looking to streamline application processes. These have a variety of aims, but broadly all feature a harmonised question set allowing underwriting outcomes, either indicative or guaranteed, to be assessed prior to application.
The benefit of such a system is clear. Product selection can be based on prices that take into account individual medical circumstances and a single application form, familiar to advisers, would also be far easier and more efficient. Examples of this type of approach are already commonplace for a wide variety of insurance products, particularly for motor and home insurance.
But life insurance is not the same as motor insurance. The range of information that has to be considered in order to make accurate risk assessments for life insurance is far broader than that used for general insurance products. The underwriting approach for life insurers has to be able to cope with a huge variety of medical disclosures.
In the market there has been a quiet revolution using technology to automate decision making, reduce the quantity of evidence requests and speed up end-to-end times. This has been fuelled by competitive pressure and distributor demand. We, as an industry, must be careful not to undo this work with a poor implementation of a harmonised approach. Doing this badly would wind the evolutionary clock back 10 years.
Without care, a single application process could stifle this type of innovation in processes and move to a lowest common denominator. There would be no clear incentive to further improve and refine the common application process and progress could cease. Failure to provide a process that is as robust and evolved as current systems could result in a worse end-to-end journey, more reliance on manual underwriting and higher prices. Furthermore a process that puts a single third party as gatekeeper of the application process puts huge reliance on them to be competent, cost effective and not to abuse their unique position.
I don’t know what the solution is to this problem, and I suspect nobody else does either. Before committing to a costly, IT intensive implementation based on guesses about what might work we should think about what steps could be taken to improve the process without destroying everything currently in place.
After all, around eight out of 10 customers get the standard rate and of those who get rated, the majority (about 70 per cent) are for Body Mass Index. Moving height and weight to the quote stage of the application process would solve a part of the problem and provide the insight we need to avoid costly mistakes in future.
Tom Allen is head of protection pricing at Aviva