Underwhelming underwriting

clock • 7 min read

Ian Teague queries whether the industry is delivering the best possible underwriting experience to consumers and advisers.

Whether underwriting is as painless as it could be is a key question the industry must continually ask itself at a time when new protection policy sales are falling.

The industry's tongue has been wagging wildly lately on the underwriting debate, getting its tired muscle around the challenge of the process-efficiency-versus-risk-acceptance conundrum. By that we mean reducing the level of underwriting leads to the life company knowing less about the individual client and, therefore, accepting a greater level of risk, which inevitably leads to higher premiums.

As a consumer, if I were to receive a quote that subsequently goes up drastically when I get nearer to buying the product, I would be put off. And, I would ask, why so? The answer is that many life insurance quotes are approximations - unless an adviser has rung around provider underwriting helpdesks prior to quoting.

This places a huge burden on providers and advisers, with unnecessary administration strain. This could be avoided using technology such as a point-of-sale (POS) tool, which uses providers' unique underwriting rules to deliver indicative ratings.

The suggestion for more improvement for the adviser community can be seen in an ongoing stream of public commentary and is evidenced in a recent study conducted by iPipeline, in which 350 advisers took part. Of these, 58% thought that having the ability to capture more client data and medical conditions up front would help improve the underwriting process.

Furthermore, 55% thought setting realistic client expectations as part of the underwriting process would improve the process and, ultimately, sales. The outcome is that advisers believe the process still leaves a lot to be addressed if it is to further reduce administration costs, increase conversion rates and improve the overall adviser and client experience.

Areas of improvement

In terms of some of the improvements, we see a number of life companies relaxing their underwriting limits, technology companies launching new POS underwriting tools and the continued introduction of simplified products.

These have all had a positive response from the market, but all face the same challenge: aggregated processes without cross-industry support. Unless single processes can be delivered across a range of like-minded products, the consumer or adviser will still need to deal with multiple processes as part of their research in selecting the right product and provider.

This is a general challenge that has been around for as long as can be remembered. The industry should do more to collaborate on processes while still being able to remain competitive. Some might argue we still compete too much on process.

The survey also confirmed the most common problems with underwriting today include the slowness of the process, the loss of cases due to price expectations changing during the process and the restricted provider coverage on POS underwriting systems that are emerging. 

Although the survey respondents recognised some good and improved life company practices, there is still more to be done as an industry to improve the overall process for advisers and providers and, ultimately, provide a better, more streamlined and accurate buying process for the consumer.

The current process is still asking advisers to spend too much time calling provider underwriting desks to get the relevant level of information - 38% of survey respondents call two to three providers for each case.

There are still adviser firms producing multiple online applications to help answer the underwriting question, which is clearly resource-intense - not only on the advisers, but also the providers who have to deal with them. And this still doesn't help with cases that need to be referred for manual underwriting or where the life company requires further medical or financial information.

To get client expectations in the right place, at the start of the sales process, there still needs to be more aggregated capability at the quotation stage. But we still see a lack of web-enabled rules engines in the market to permit this or, indeed, provider willingness to put rules outside of their own domain, as providers use their rules as a point of product differentiation.

There needs to be recognition that there is no single answer to the challenge. A range of approaches reflecting different consumer and adviser needs is required, acknowledging there will be some who are quite prepared to spend time dealing with the initial part of the process to get the right outcome and others who want a quick price with motor insurance type-fulfilment.

The catch-22 is that those who are prepared to go through the detailed underwriting process are those more willing to accept a higher premium, while those looking for simple products with cheaper premiums are those who may have to accept higher premiums, because a lighter approach to underwriting has been taken - unless the industry consolidates to do more to improve the current process and take away the administration burden for both advisers and providers.

Graham Jackson of PWC summed it up nicely in an interview with COVER: "Traditional approaches are potentially too slow. The industry needs quicker and more economical ways to meet changing market demands." Although this was in the context of the growing demand for online advice, it undoubtedly rings true for the underwriting process as part of the new business research and buy process for consumers.

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