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Life offices need to take some risk

Emma Thomson, support development manager, and Kevin Carr, head of strategic relations, at Lifesearch say life companies are slashing protection premiums but cherrypicking policyholders

We will save you money. We will save you time. We will improve your customer service and we will pay you more.”

That sounds like every IFA’s dream but this is exactly what life offices have been saying to intermediaries over the electronic submission of protection applications for almost five years.

Many bought into this dream and, arguably, rightly so. Some of the systems and processes work very well and probably just about achieve each of the above points. Just.

But as of yet, the majority do not. The overall protection application process, including the length of application forms, electronic submission and modern underwriting, has become so time-consuming and complex that intermediaries need to understand the process better and to recruit more staff than ever before to manage the increased admin burden and keep control.

Lifesearch started submitting electronically around five years ago and has since been involved in the development of the e-submission process with many life offices.

We recently carried out research to measure whether we are saving money and improving our overall customer service proposition and the findings so far indicate that life offices have created a huge increase in operating costs for intermediaries.

Better completed application forms and better-informed clients lead to less non-disclosure and better persistency. But life offices seemingly want more questions, more exclusions and more underwriting in order to provide cheaper premiums but at whose expense?

Maybe, just maybe, the life offices knew this was coming and took steps to move the burden of asking complex underwriting questions and keying more and more data input to the intermediary before the process began to expand out of proportion.

We recently entered an application online where one of the questions reads:

Do you currently have, or in the last five years have you suffered from, any of the following?

-Anxiety, depression, or any form of nervous or mental disorder for which you have been prescribed tranquillisers or anti-depressants?

This is one of the standard questions commonly asked on modern application forms. We answered “no”, in line with our customer’s answer over the phone but when the client received the written confirmation in the post, they replied, with a little doubt, “yes” – depression due to bereavement in 1998.

This response, even though the event occurred seven years ago, triggered a further questionnaire and a report from the client’s GP. When queried, we were told this was because the reinsurer was being picky and would not pay a claim unless the life office investigated the matter further – so, not a very easy process at all.

These sort of barriers can damage the relationship between intermediary and customer and risk losing the sale completely.

Some life offices are employing every tactic in the book to cut rates even further – more questions, harsher underwriting, more exclusions, poorer service and less admin (if the intermediary does it instead). Some call it preferred life underwriting, others call it cherrypicking.

Application forms have quadrupled in length over time and continue to expand as the need for ever more answers to more intrusive and embarrassing questions grows. But with so many questions (expected and unexpected), where exactly is the risk?

One firm recently put it to us as follows – the industry is in danger of taking the long application form philosophy too far and overly complicatingthe application process. There is afeeling of risk-aversion in the industry at present and perhaps this is a symptom of that but we should be asking ourselves whether we have gone far enough.

We looked up the word “risk” on an internet thesaurus to remind ourselves and found the following definitions – brave, danger, dare, exposure, fortune, gamble, hazard, liability, luck, openness, opportunity, peril, tackle, uncertainty, venture, wager.

Does this sound like a modern insurance company to you?

More aptly, the antonym for risk is safety. So we tried the word “safety” on our thesaurus and the first definition that appeared was “protection”. We kid you not.

We remain in favour of e-commerce, as we have been for many years, as long as the glove fits. Ongoing intermediary input in the development of e-commerce systems is highly important but some life offices continue to ignore their customers and design systems which suit themselves rather than the end-user.

The users of these systems need stability, detailed tracking, quick decisions (over a range of circumstances), priority administration (above paper) and monetary incentives to allow for the recruitment and training of the extra staff required to input the data accurately in the first place.

To those offices genuinely achieving the gains set out above, we say that if you can continue to do this while cutting costs at the same time then this is proof t the other offices that e-commerce can genuinely benefit all parties involved.

To the rest, we ask you to listen to those who use your systems and value their feedback. Otherwise, do not be surprised if you find your staff opening envelopes for many more years to come.


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