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When enough is enough

Just how did we get where we are? Application forms with 40+ underwriting questions that must take 20 minutes or more to read, let alone complete. On-line processes that are generally a mirror of their traditional paper counterparts.

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.


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. And once we have moved that process into the 21 st century I expect we are going to have to wait for the 22nd before we make the process IFA user friendly

    All I want to do is get my recomendation (i can do that now) electronically in front of my client. BUt together with the key features, quotes etc and THE APPLICATION FORMS which can be complerted using the insurers intelligent system BUT MUST THEN COME BACK TO ME FOR checking and correction and recordingbefore forwarding with cover correspondence.

    (you many be surprised how many basic mistakes clienst make that an intelligent system might not pick up on)

  2. There could be a lot said for a simpler system. Most of us know after asking a few questions of a client about their health if we’re going to have problems and the client would do better speaking to a telephone based medical specialist to make sure they get full disclosure or if a simple 4 questions means cover could be given on dayone. The old Scot Prov applications 4 or 4 years ago worked really well if you had a healthy client. An intelligent online system which allows both adviser and client to
    input before final release from the comfort of their own home/office is probably the best way to make sure full disclosure takes place. We as a firm record all client meetings as sound files including the taking of medical info and this could also be a good way of insurers double checking medical disclosure if they accepted/asked to have a copy of the discussion sent to their medical team rather than have us trying to spell medical conditions we’ve never heard of!

  3. martyn llewellyn-smith 17th November 2009 at 6:55 pm

    In my lowly opinion, it would help if other IFA’s would stop giving the providers as much grief over underwriting. The process is, I agree, long and painstaking but it does help if applications are submitted fully completed without spelling mistakes and are eligible unlike some of the comments here. Protection properly advised or sold is a highly important and specialist job that should be treated as carefully as any craftsman or professional treats any device or product that is in use for a persons life-time, or a good proportion of it. Remember the horrendous press we all had to suffer through the results of cutting corners in questions asked, for the purposes of shortened underwriting processes and quicker sales? Scottish Provident sold a lot of policies on the back of cutting the corners but also had a lot of complaints as people did not disclose what they should. Whose fault was that? Did the brokers or IFA’s drill down enough to ensure the answers were as full as they should be? Or did they just get as many no’s down to get the applications in and the commissions paid as soon as possible? Good business for some, especially as the backside had fallen out of the whole market in 2000. I wonder if the brokers that sold the CI policies that did not pay out had the premiums clawed back? I hope so. It is little wonder the underwriters want as much information as possible. For too long the protection business has been derided and abused by those that come and go, treating protection as a filler when the easy marks are not around. The application process is the key to the underwriting, the underwriting supports the final contract. The contract is all important. Ask the bankers. Why could the Government not claw back bankers bonuses? Because if it did and the claw back was not provisioned in law or the contract and they broke the contract then the whole contract system would be “out of the window”. If there were a standard form and standard underwriting there would not be a need for advice. We could all get on down to tesco or Sainsbury or just put it on line in a common web page and get a quote. We have the best protection products in the world available here in the UK yet we have less uptake than any other country in Europe or USA I understand. Why is income protection not in every household? It’s too difficult isn’t it? Tell the family whose house has just been re-possessed that it is too expensive! I have been in this industry for 15 years. I am not rich, but all my clients have either got income protection or they have be given ample opportunity to put it in place. I have never had a complaint against me from a client but I have been wrongly abused and victimised because I would not sell crap products being forced down my throat by Edward Jones so I left after they did their best to pressure me into submission. None of my clients have Glitner Bonds, AIG or Lehmans products. I was actually seriously verbally assaulted then victimised because I gave my clients too much time and advice!!! So stop whinging about underwriting protect your clients, the more correctly advised products that are sold will create more of a market and we may get a good provider like Swiss Life protection returning to our shores.

  4. ref 1st comment from Alastair Lyon – interesting that he says clients make mistakes – he needs to check his own work first !!

  5. I hope the industry listens to Jerry.We need much more new thinking about selection and must put ourselves in the shoes of the IFA and his client.
    Underwriting is necessary but we can do so much to alleviate delays and inconvenience with a bit of intelligence and a willingness to be proprtionate in assessing the type and amount of evidence in relation to the real risk run.

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