Last year I wrote a piece in Money Marketing suggesting we needed to rethink how we underwrite protection. The very interesting piece in MM a couple of weeks ago on technology and protection underwriting was one of the best things I have read in terms of its willingness to explore new ground in assessing risk.
I have spoken to Ian McKenna about this on a number of occasions and I think he is absolutely right that the protection industry has been quite tardy in exploring new opportunities.
The explosion in the growth of wearable technology is one example of where new thinking could radically affect the way we underwrite. The longer the industry fails to innovate, the more it is at risk from new technology players with a completely new proposition that might blow current insurers out of the water.
There are two other interesting aspects to this whole discussion, both provoked by the success of over-50s plans. Despite their relative success I don’t think there are too many people who would claim that this is due to either the quality of the product or the price.
The main reason they are successful is that they are easy to buy. Coupled with this is the fact that you don’t go through the underwriting process. People are prepared to pay well over the odds for life cover if they can avoid being underwritten. This is not because they all fear revelations about their medical history coming to light. It relates partly to squeamishness about health but the main reason is that our underwriting methods can be a hassle and they delay acceptance. Some companies claim to get over 70 per cent of their proposals accepted by straight-through processing. But we also know that instead of 5 per cent of cases being rated, the figure is usually over 20 per cent now. That is in an era where mortality rates are improving exponentially. As the Americans love to say, go figure.
It also amuses me that we put such emphasis on price when very successful producst like over-50s plans are sold with no emphasis on price. If any price comparisons are done by potential buyers ,nobody would ever buy a product unless they were in very poor health.
People buy over-50s plans because they trust the people advertising them – but those people are not giving advice – and because they are so easy to buy. That’s the big lesson I think we need to heed.
Are customers really fixated on price or might they benefit from a plan with a much more insightful approach to underwriting? One that might give useful real-time information on your medical conditions and which might almost be fun to buy? I think the answer is very clear but I’m not sure many people are listening.
Peter Le Beau is managing director of Le Beau Visage