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The Expert: Underwriting hopes are hanging on the telephone

Tele-underwriting is creating a lot of debate in the UK insurance industry.

It is claimed that it will deliver cost reductions, improved processing times, a better customer experience and a faster sales process by questions on health being completed over the phone by a trained interviewer. So how does it work?

The agent makes the sale as normal, confirming the premium and so on, then completes a short application form containing basic client information, the cover required and contact details. The provider then sets up a telephone interview with the client to complete their health details.

The tele-interviewer is able to make full use of interactive underwriting tools to collect information from the client. As there is no paper form, the interview can be tailored to the individual circumstances of the client and more detailed information can be collected about any conditions disclosed.

The theory is that the interviewer can use their knowledge and interviewing techniques to get better disclosure from the client and in the process create a risk portrait of the client superior to traditional application methods.

Some insurers are running pilots to test cost-effectiveness, disclosure rates, proc- essing time and improved customer service. The potential benefits of processing business this way are significant, if done correctly, and the processes are scaleable.

As information collected is more comprehensive and tailored to the customer, the underwriters should require less additional information, speeding up the time from sale to policy inception. It should free up time for the adviser to spend with other clients. Of course, the recording of the interview provides very strong evidence of disclosure should a future complaint or dispute occur.

However, enthusiasm for this new process needs to be tempered with some reality checks. Pilots have worked very well using nurses who are trained to extract this type of information from customers. Some insurers are trying to use experienced call-centre staff to perform this role. But, whichever method you use, there are not enough experienced staff available for a mass migration to this business model in the short term. As usage grows, there is a real risk that the quality of the service provided will deteriorate – something everyone will have to watch very carefully.

It also affects the sales process fundamentally. Some advisers prefer to lead their client through all aspects of the process rather than handing over an important part to the insurer. Knowing any health problems your client has could also change your advice, as insurers may react differently to certain illnesses and disabilities.

Some advisers will also have a more mature client base, where the benefits of tele-underwriting are reduced due to automatic underwriting limits.

Of course, nothing comes for free. If the adviser is passing work back to the insurer, this is likely to lead to lower commission rates on business transacted this way.

Probably the most fundamental issue for the adviser is passing over the final completion of the sale to the insurer. Generally, around a third of customers have to revert to a paper process and it is not clear how many sales are lost because the client loses enthusiasm during the process.

So, simply switching to tele-underwriting might not have the desired impact, if specific elements of the process are not closely linked to your strategy and business model.

Tele-underwriting is not a one-size-fits-all solution but is one of a number of tools that insurers will increasingly adopt to speed up and improve the underwriting of protection business.

This development will take time to find its role in the underwriting of protection business. There are still issues to be resolved and it needs to demonstrate its advantages for agents, insurers, underwriters, reassurers and, most important, customers, before it becomes fully adopted.

But this should not stop us from working towards change. If tele-underwriting delivers the benefits it claims, the protection market will be looking at a new and powerful tool for risk assessment.

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