Why can I buy most other insurance products same day, more quickly than I can a simple term policy?
The increase in application form length can be tracked back to the early “noughties” and arose from:
· FOS ‘guidance’ for questions to be shorter and more specific
· the requirements of one reinsurer who provided the bulk of the available Critical Illness capacity.
Long application forms are perceived as necessary for lower reinsurance prices. That is not the case. Once the underwriting basics are met then pricing differentials are quite small, and can generally be eliminated by effective process design and the use of technology.
Things could, should and can be so different. With increasing use of point of sale underwriting technology it is possible to:
· flex application form design for product and applicant risk profile
· significantly reduce the number of questions asked by changing the style of questioning and use the systems capability to ask intelligent drill down questions where required
· automate the majority of requirements for additional medical information.
Examples of what can be done are the simplified/simple term offerings from Aviva and Aegon, which use an abbreviated question set and drill downs for the bulk of customers, and deflects applicants with more complex risk profiles to traditional application processes. But even these only scratch the surface of what is possible.
Most insurers just don’t invest sufficiently in their point of sale offering and don’t think radically enough about redesigning the whole process. Most don’t collect or use the data they have to develop or enhance the process. Most initiatives are just tweaks to existing inefficient offerings aimed at raising STP rates. In fairness, many are hamstrung in their efforts by their existing systems or by internal budgetary constraints. But these are not really valid excuses.
One bancassurer has made that investment, and they have recently rolled out a system that (amongst other things) provides on-line acceptance terms for 85 per cent of applicants for life and CI, gives indicative ratings for the bulk of the remaining applicants from a 10 question application form and for a customer base with an average age 10 years older than market norms.
OK, their CI product doesn’t have occupationally defined TPD benefits and some of what they have done could not be utilised in the intermediated sector, but it shows what can be achieved when the will (and the money) is there.
Most companies can only dream of STP rates at level. What is the value of a further 25 per cent STP rate in terms of customer service and underwriting expenses?
The underwriting process will never be welcomed by those selling the business but it could be made to lot less obstructive and designed to provide a better customer journey. The long term cost and process efficiencies for all stake holders should be compelling. So why is no one doing it?
Jerry Brown is principal of Mithrandir Consulting, and former Swiss Re head of life and health underwriting.