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Opportunity or threat?

Money Marketing reported recently that the agreement between the ABI and BMA covering how much doctors should charge for completing GP reports has ended. The post article thread made for some interesting reading…

It is important to note that levels of GP reports have been reduced by a number of insurers over the last few years as we all began to realise that the value of the reports was limited, and that the introduction of new processes like tele-underwriting were more than capable of replacing GP reports for a large number of applications with no reduction in the quality of information disclosed.
 
A number of insurers now only ask for certain information in some cases, these are called ‘targeted GP reports’ where they want to know more about a certain element of the clients health.  
 
The problem for many IFAs is that many of their clients are high net worth individuals. The sort of clientele who need higher levels of cover.  As an industry we continue to have medical underwriting limits based on the size of sum assured, age and smoker status.  This means many IFAs still have to put up with the majority of their protection clients incurring delays due to insurers wanting GP reports before acceptance. This gives the adviser the impression that nothing has changed, and most insurers still want to get a GP report.
 
If we changed the basis that we use for requesting GP reports, we could make sure that we only ask for them when we really need them. Rather than using age, sum assured or smoker status, why can’t we be more scientific with what makes us ask for a GP report? The end of this agreement means we may have to be.  
 
The removal of the agreement between the ABI and BMA means that doctors are now able to set their own charging structure for completing a report for insurers. The obvious threat is that most doctors decide to charge insurers more for this service. The industrys medical underwriting costs could soar if this approach was mirrored across the GP population in the UK. That could increase the costs of cover. Which makes this a threat. We’re still in a recession. The majority of protection purchases are still based (rightly or wrongly) on price. Would consumers buy less protection if prices rose to cover increased underwriting costs?
 
But… it is also an opportunity. Munich Re did some research a few years ago which reviewed a thousand applications that had been referred for a GP report during the new business process.  Eight hundred and fifty of those GP reports had no impact whatsoever on the decision made by the underwriter. That’s 85 per cent of GP reports which could be adding no value.  
 
This makes me wonder if the recent end to this agreement between the ABI and BMA may be the final straw for some chief underwriters. Whilst we can’t do away with GP reports completely, maybe this is the issue that finally means we move to a stage where we only ask for them when we really need them across the whole industry and all client segments?
    
Andy Milburn is head of marketing for Munich Re UK Life

 

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Another extremely important factor is the considerable delays that requesting a GPR often creates.

    Underwiting is becoming polarised where what appear to be ‘clean’ cases are fast-tracked through but others suffer inordinate delays where acceptance terms may take three or more months to appear.

    Anything that can restore robust administration across the spectrum of protectin underwriting will be welcome.

  2. couldnt clients get copy of their medical records and send with application to underwriters then there would be no non disclosure get outs for insurance companies?

  3. This is a major headache for our company as we specialise in corporate protection. From what I gather, the Practice manager or sometimes the G.P.s assistant/secretary fills in the forms for them. All they have to do is sign and send off.

    In the latest problem case, we could not get the form filled in and off to the underwriter. I spoke to the doctor direct and he promised to sort it out. He rang me back several days later and apologsed. It was his fault, he found the form in the boot of his car. Well at least he was honest, I thanked him. I know the problem but do not know the answer.

  4. The whole underwriting model is a busted flush – there is insufficient science behind it in most companies and most arejust keen to cut costs without examining the value of each activity. So they often stop doing or don’t do enough of the things that count and perpetuate the things that add no value at all.

    I’ve been telling them this for the last decade or more and got bored doing it.

    There are many ways you can skin this cat but it needs investment from the insurers and buy in from the intermediaries.

    The only trouble is the insurers rarely invest properly in u/w and brokers want their commission without any risk or responsibility…

  5. Most underwriting is a waste of money by the insurer. Take the rare example when a life insurance premium is loaded because of a health issue (150% or 200%). If the client really represented a seriously increased risk, would an insurer be happy to insure that individual because he’s paying £20pm rather than £10 when the possible payout is £100,000. Nonsense ! Just refuse to insure. It’s not as if the insurers base their premiums on reliable and properly analysed statistics – double the premium if the applicant is a smoker. Very scientific – NOT.

    It’s a bit like the so-called security measures to reduce the terrorist threat. Unless EVERY passenger is to fly naked after his internal examination has been carried out, atrocities will still be carried. So stop searching old grannies who have lived here all their lives as they fly to Malta for their winter break, and start concentrating on brown faces with woolly beards who came here from Somalia 3-months ago and are now wanting to fly to the US. No can do – don’t want to upset the very people who wish us harm.

    Similarly, underwriting should be about targetting those applications where initial information points to a serious illness being present. I’ll bet a more relaxed approach to underwriting (getting rid of 90% of underwriting staff) would actually save money despite the odd bad risk getting through.

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