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The underwritten path to the future

Last week Money Marketing revealed that protection underwriters predict lifestyle factors will increasingly be taken into account in protection policies for younger people.

It seems, however, that the underwriting industry as a whole is fast moving away from traditional GPRs and medical examinations and looking for alternative underwriting options.

MorganAsh asks female applicants about their dress size, and male applicants their waist and collar size as a way to corroborate the height and weight answers given.

Managing director Andrew Gething says the firm is also in the process of using more psychosocial questioning when tele-interviewing, which at the moment Gething says “is confidential to specific providers we are developing this with”.

But while MorganAsh customers like this approach, Gething says the industry is still lacking in its knowledge around these new risk factors, such as lifestyling, screening and tailoring.

He says: “For example there is no data on the topic so there is no underwriting guidance. As a result, providers are reluctant to collect data that they can not use, so innovation is very slow.”

Moving forward, Gething predicts that tele-interviewing will include more open questions designed to gather information on the applicant, rather than the present ‘have you ever had’ approach, which he says “was primarily designed to protect the provider in the event of a claim”.

RGA UK business development manager Mick James goes as far as to question whether the industry could remove medical questioning for younger lives completely.

He says: “Can I see a point where no health related questions are asked of young people? Potentially, and there are examples in the Australian markets where this happens in conjunction with a pre-existing conditions exclusion. This kind of a product could have potential for young consumers in the UK.”

For now, though, medical tests are still very much in place. But Munich Re chief underwriter Paul Gyseman says the current trend is to drive down their cost but maintain risk management effectively.

He says: “It’s pointless asking for a young healthy woman to have a stress electrocardiography, when we know that the test is always going to be negative. It is a complete waste of money.

“So the upshot is, lets move away from only using age and sum assured as the two criteria, and move towards a smarter, more targeted approach that maintains risk adequate terms.”

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There are 4 comments at the moment, we would love to hear your opinion too.

  1. Jack Morris, Corporate Consultants, Wolverhampton. 9th June 2009 at 5:46 pm

    Protection underwriting
    The underwriter is basically a bookie. He works out his odds relative to his experience of previous illnesses, smoking status, alcohol intake, hereditary factors etc. This will influence his decision as to what he charges for the cover. This knowledghe has been gained over a number of years, Some companies are more lenient with obesity and or say blood pressure than others, they can be quite different. This knowledge enables them to charge a rate that will make them a profit over the distance. Adding in other wierd and wonderful factors is not going to change the general situation. It is specific enough and works. Are the underwriters looking to enlarge their departments by creating more work???? .

  2. Jerry Brown, ex Head of U/W & Claims, Swiss Re 10th June 2009 at 9:35 pm

    Protection Underwriting
    What a load of old tosh these people talk. It’s all vested interests and/or an opportunity for self aggrandisement.

    In forward thinking companies only a small proportion of younger applicants warrant medical reports for disclosure purposes and an even smaller proportion are rated or declined. Underwriting of younger applicants will increasingly become automated in order to minimise costs and maximise the customer service.

    Additionally, only a tiny proportion of younger lives warrant sum assured based evidence – so where is the driver for change? Unless you want to break the current model by introducing preferred pricing; and just who will that benefit? Not the bulk of customers who don’t fit into the squeaky clean lives category…

    Aren’t these exactly the same people who said that pharmacy screening was the best thing since sliced bread? And just what’s happened to that enterprise…?

    As for pre-existing exclusion clauses, try explaining how they work in one paragraph of plain English please Mick James…

    The industry has just softened claims standards to pay a proportion of claims that shouldn’t be paid and now you want to exclude a proportion of claims where cover could be offered and the claim paid. Just how does this makes sense and how does it fit with TCF…?

    Simple products with simple, evidenced based underwriting is what is required. Complexity only confuses and disenfranchises consumers.

  3. Andy Milburn, head of marketing, Munich Re 11th June 2009 at 11:22 am

    Protection underwriting
    I like the idea of asking a client less questions and making the application process smaller and easier. I think most people I speak to who are thinking of these new techniques are doing so to try and REMOVE existing questions, or at least replace them rather than adding the new techniques to those we currently use. If ten lifestyle questions got rid of fifteen health questions isn’t that an improvement?

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