Life insurance has been the foundation stone of our industry for many years as most customers need some form of life cover as the building block of their financial planning.
But while the industry has been innovative with the products on offer, with simple term insurance developing into critical-illness cover, income replacement, waiver and others, the process of setting up the policy for the customer has remained broadly unchanged for 200 years.
And what a process. For what is a relatively straightforward purchase, the process can seem overly complex. Adviser and customer complete the proposal. Proposal is despatched to provider. Provider corresponds with agent and customer to understand, clarify and interpret the customer's state of health. Medical practitioners are consulted. The premium is fixed and the policy issued.
The process can take weeks, involve lots of exchanges of paper and be generally frustrating for all.
Two things cause this complexity. The first is that understanding what may have happened to the customer in the past from the proposal form is not always easy.
Some more amusing recent disclosures from customers received at Legal & General have included “Rectal examination showed normal-sized thyroid” and “I have lorry driver's botty.” Even occupations can be difficult to interpret, my favourite is the window cleaner who described himself as a “transparent wall engineer”.
The second issue arises where you need to get information from a medical practitioner as this takes time.
Legal & General now issues around one in seven of all life insurance policies in the UK and we have been working hard to remove some of the pain from the process.
Not surprisingly, we have found the answer in technology. We have all heard for years how the internet or computing power can change the world but a number of key factors have come together that now really make it the time to let technology take the strain. A few of these are:
Through Origo, the industry has developed standards for many e-commerce functions which give providers the confidence to invest, knowing they will not be on their own. Advisers also benefit because the offerings from a number of providers should appear reasonably consistent, making usage easier.
The computing power of desktop and laptop machines has increased enormously, allowing much more complicated transactions to be carried out at the point of sale.
The internet has developed as a reliable conduit between adviser to provider and, with significant adoption of ADSL and other high-speed links, working through the internet has become more realistic.
Providers are now using all three of these developments to change the way we arrange life insurance policies.
New solutions include:
New desktop packages such as Pacs (product application component) which create electronic application forms for life insurance.
These significantly speed up the process of applying for life cover by validating the client responses and, in some instances, loading the application directly on to the provider's new business systems.
The internet being used to transmit application data between advisers and providers rather than using post. It is also opening up access to new business systems for agents to track and update customer cases as they progress.
Intelligent underwriting tools have been developed to help interpret customer responses and categorise the risk, allowing quicker underwriting decisions to be made and reliance on medical practitioners reports reduced.
Using these tools, it is now possible to transact life insurance through the internet without the need for an underwriter or a signature (or even a postage stamp).
There are always going to be situations when a medical underwriter will need to assess a case but experience has already shown that 50 per cent of cases can go through without this requirement.
This can have huge cost savings for the adviser and product provider as it significantly reduces the time normally taken for business to complete. It can also have a direct impact on the number of sales as clients can be told immediately that cover is in place.
Other solutions have also been developed that, while not giving the full benefits of being online, allow the adviser to work away from their office.
They can still collect the customers data electronically so that it is validated and complete but this then allows them to come online to submit the case when it is convenient to them.
When any case is submitted to a product provider, the management of pipeline business is critical to all advisers and can be difficult and time-consuming to manage when trying to contact a helpdesk to find out basic information on the progress of an application. Again, technology can now provide this information via the internet 24 hours a day.
Technological support for protection business is already firmly established with some providers. This helps us as providers to be more efficient as it speeds up the process of transacting protection business, takes the complexity out of protection business by automating decision points, provides cost savings as pipeline business can be efficiently and effectively managed helps to increase sales as clients can benefit from immediate acceptance and extends the level of adviser control throughout the process.
This is surely a better way of conducting business all round.