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Martin Werth: Dealing with underwriting diversity


I read with interest the recent Money Marketing article that Aviva has toughened its ex-smoker criteria but failed to tell advisers.

There is strong evidence that the mortality of ex-smokers is greater than lifelong non-smokers and the Integrated Household Survey 2012 showed one-third of UK adults are ex-smokers.

There is no reason why 70 per cent of customers of the same age and smoking status should get one price. We’ve already seen additional questions on driving disqualification and motorcycle use, and in due course I expect to see other risk factors such as postcode and occupation.

Whilst I support Aviva’s approach and believe underwriting diversity is good for consumers, we need to give advisers accurate comparison information they can act on at the point they make an insurer recommendation. As Aviva said, it makes changes to its underwriting strategy all the time, but for advisers this adds further complexity.

Advisers have a regulatory responsibility to take reasonable care to ensure that a policy is suitable for their client, taking into account cover, cost, and relevant limitations. This requires an analysis of a sufficiently large number of insurer terms taking into account relevant medical information. Making a recommendation purely based on a quick quote is unlikely to meet these obligations.

As part of the Protection Review’s Adviser Training Roadshow, CBK principal Peter Chadborn outlines a process of contacting say three potential providers to obtain indicative underwriting outcomes prior to making a recommendation, having first obtained headline medical information.

This is a wholly manual process, which is time consuming and expensive for both advisers and insurers. However, there is little alternative if an adviser is to meet their regulatory obligations, as well as to manage their client expectations.

At the moment there are no short cuts. Underwriting is too complex and subject to change to rely on past experience, and this provides no audit trail. Equally multiple applications add significant work and must still cover sufficient companies to demonstrate a market assessment. Finally applying to one insurer who offers special terms, could impact on subsequent applications.

Whilst we have a huge protection opportunity, the sales process must be easy, fast, fair and profitable for advisers. For advisers protection is already harder to complete (due to the application process) than other products. Reducing price and salami slicing underwriting to secure competitive headline rates is the road to nowhere. A lower price that adds sales complexity has a double impact on margin for both advisers and insurers. On this road only those with the deepest pockets survive.

Einstein defined insanity as “doing the same thing over and over again and expecting different results”. We need to change course and make protection so easy and fast for advisers to deliver a first class experience and to earn a fair reward.

New point of sale comparison technology will support underwriting diversity. This is good for insurers who can flaunt their differences, which should also be good for customers, and in addition demonstrates the real value of advice. Ironically, it is the lack of up-front certainty of price and product features that weakens an adviser’s ability to recommend on value, and reinforces the default of cheapest quick quote price.

Accenture stated that 81 per cent of European insurers identified their two significant barriers to embracing new technology were constraints of IT legacy systems and the inability of their organisation to act quickly. Perhaps this highlights the opportunity for new players, or those with a “can do” mindset?

Whilst I welcome Aviva’s approach, this must be done hand in glove with point of sale comparison technology, so advisers can easily access insurers’ real prices and product features, personalised for their client.

Without this it further reduces an already discredited headline price, and adds to advisers’ costs in providing a first class client experience.

Martin Werth is chief executive of Underwriteme



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There are 3 comments at the moment, we would love to hear your opinion too.

  1. What Mr Werth fails to understand is the ‘calling round and difficulty in the market’ is the advisers friend.

    We dont want it simple or life cover will go the same way as motor insurance with the death of brokers. How many motor brokers (once a very profitable market) do you know?

    I can quote Einstein too – “Everything should be made as simple as possible, but not simpler.”

    Again he shows complete ignorance in stating we need to get three quotes? Totally untrue. The adviser must consider all products (if they’re) independent.

    Not sure you understand the market you’re in Mr Werth,

  2. @Mad Dog – “provide unbiased and unrestricted advice based on a comprehensive and fair analysis of the relevant market” from, not the adviser must research every potential provider even if not on an automated comparison system.

  3. “outlines a process of contacting say three potential providers to obtain indicative underwriting outcomes prior to making a recommendation, having first obtained headline medical information.

    This is a wholly manual process, which is time consuming and expensive for both advisers and insurers”

    Martin, I must disagree with this. Today in the space of 1-hr I spoke to 8 different underwriting departments in regards to a fairly complex case which required a good bit of explanation. For a relatively simply case, such as a BMI issue, blood pressure issue if the adviser has their finger on the pulse in regards to underwriting philosophy then calling 3 providers could often be done in less than 10-minutes. Hardly a massively time consuming or expensive exercise.

    I also agree with Black Dog in that having to physically speak to an underwriter is what keeps many of us in work. As soon as the process becomes almost wholly automated then brokers will generally be sidelined in favour of the aggregators and non-advised process.

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