I’m going to begin with a revelation that will surprise all who know us – I was in a pub with Protection Review chief executive Kevin Carr the other day.
That of itself surprises no one but we were both drinking soft drinks. Having decided Arsenal have basically got the Champions League and Premiership sewn up, our conversation turned to the industry. Kevin was musing over the introduction of over- 30s plans. It is a fascinating development to my mind simply because it emphasises that the big obstacle to buying insurance is delay.
We live in a word of instant gratification because of the growth of online propositions.
Part of my portfolio of roles is working with groups to encourage blue sky thinking. I was imagining doing this for the protection industry, in particular how the buying process could be made easier and faster, and it would not take a bright group of people long to spot the biggest obstacle to this easy buy scenario is underwriting.
As someone who headed a major reassurer’s underwriting operation in the UK for many years, this is a hard admission to make. If I was leading such a group, my next action would be to encourage them to think about what would happen if we did not underwrite at all.
In the early 1980s, this happened for a time when the then Government introduced mortgage interest relief at source and the industry, which was largely predicated around mortgage endowments, was flooded with applications from people wanting to remortgage and switch their insurance cover.
Some companies, even some extremely traditional and conservative companies effectively dispensed with underwriting not realising that there were some sales people and brokers (for that was what they were then) who would trawl hospices and seek out the terminally ill to get them to remortgage their house. Yes, they really did.
Now you see why the Financial Services Act came to pass four years late. Interestingly, the CMI committee of the Institute of Actuaries set up an investigation into the experience of this cohort and found that over time – after a not unsurprising spike early in the study – mortality experience settled to expected levels. That is a lesson I do not think the industry ever took fully on board.
So the message is make policies ridiculously easy to buy so that there is no delay in completion but stop obvious anti-selection by those who might be declined or heavily rated. Easy isn’t it?
If Kevin and I had stayed in the pub long enough we could have sorted world poverty and global warming too. But there is a serious morsel for the industry to chew over in what I have said.
Peter Le Beau is managing director of Le Beau Visage