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Some providers are altering how they identify standard lives

Claim payment is just one measure used by advisers in assessing if they should be using a provider and sometimes if a client is suitable for that provider. I say that because I think we are seeing a subtle change from a few providers in the way they identify standard lives.

About 15 years ago, I was with a business that launched a preferred lives contract. If you were in a low-risk occupation, not overweight, had low cholesterol and low blood pressure, modest drinking habits and had not smoked for a couple of years, you received discounted premiums. It was marketed as a preferred life contract and was not really successful, in that it was difficult for an adviser to immediately identify that someone could benefit from the discounts and often the major risk offices still had more competitive premiums. The concept died out but looking at some of the market trends, I think the preferred life concept is being reintroduced subtly.

We assess providers regularly and look at five KPIs when trying to understand business channels and provider trends.

I look at abandon rates, persistency rates, acceptance rates, acceptance speeds and the number of cases differing from the initial premium quoted. We measure abandon rates to see if people are abandoning their application in underwriting or after they have been accepted. Persistency is useful as it is a great indicator for the client having a product they wanted at an acceptable price. It gives me comparative measures for people who went straight through underwriting and those who were loaded to see which cases might stay on the books longer.

Acceptance rates and speed of acceptance allow us to look at business through different providers, products, channels and age groups. We measure providers to identify if they are having higher than expected loadings or declinatures compared with their peers.

These all help me to understand a key measure which is how many of our customers are getting the product they applied for at the price that was displayed. We know there are always going to be a small number of loadings and clients pass quarter birthdays, etc, but, in principle, we want clients to be able to write the policy at the terms initially quoted. This was one of the reasons we launched our decision in principle tool recently, to try to ensure advisers are in a better position to help customers only apply for contracts they could have if they were non-standard risks.

The trends suggest some providers are illustrating standard rates but their underwriting engines are looking for better than standard lives. I do not have a problem with that if the criteria they are looking for is clear to advisers and customers. What I object to is increased declinatures and loadings for risks that could be placed at standard rates elsewhere.

Neil McCarthy is sales and marketing director at Direct Life and Pension Services

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