Research into tele-underwriting in the protection market shows the industry has a long way to go before it reaches its maximum potential. Debbie Kennedy explains
Tele-underwriting is firmly on the agenda for UK protection providers and is set to become increasingly widespread. Just as it is now the norm in the US, following its advent in the mid-1980s, tele-underwriting looks certain to become more commonplace in protection practices in the UK.
Conclusions from research recently carried out by AXA among major UK players, shows tele-underwriting is set to develop further in the UK over the forthcoming years. The research, which quizzed eight large protection providers, asked whether they planned to increase investment in tele-underwriting in the next couple of years. All eight confirmed that they did. These companies were also asked whether they expected tele-underwriting to become the norm in the industry. Again, 100% of providers agreed that it would become standard practice to have tele-underwriting as an option.
When faced with the statement: "any provider that does not develop a tele-underwriting capability will be committing a major strategic mistake," again, all agreed. However, there was a widespread belief that the extent to which tele-underwriting will be used will depend on the business model of the life office.
The unequivocal agreement that the service will grow is something that life offices and, by extension, IFAs cannot afford to ignore.
The two caveats presented to the providers are interesting and are worth looking at in more detail. Firstly, the caveat that it will become the norm to have tele-underwriting "as an option" needs greater understanding. How often can one expect that option to be exercised? Certainly, no one would predict that standard full-length applications, filled in by the adviser with the client, will disappear. But the signs are that usage could be high as a growing proportion of applications are currently being made via the tele-underwriting option.
While tele-underwriting can be suitable for both clean applications and those that involve disclosures, such as complex medical histories, there has been a bias towards opting for tele-underwriting for more complex applications. Intermediaries are benefiting from the direct involvement of skilled tele-underwriters to speak directly to the customer to get the relevant medical information and, importantly, ask the appropriate further questions in order to give an immediate decision.
Business model
It is not proving difficult to obtain the necessary level of information over the phone. Rather, removing a face-to-face interview appears to unlock customers' reticence to discuss medical matters, and as a result, an unprecedented level of detail is being divulged, with applicants willingly discussing the minutiae of their illnesses, habits and lifestyles. The advantage this delivers to advisers and clients is that, because of the level of detail, underwriters are significantly more capable of making decisions on proposal disclosures rather than seek further evidence.
The second caveat put to providers was the observation that the extent to which tele-underwriting is used will depend on the business model of the life office. There are three main models of tele-underwriting:
• Ad-hoc - fully completed applications are submitted online or written and posted, and cases go into the normal new business underwriting process. If there are details missed on the application form or if they are unclear from any medical report, then the underwriting department may, contact the client to clarify the missing information. This is informal and on an ad-hoc basis.
• Partial - fully completed applications are submitted online or on paper. Due to disclosures on the application form, the case is referred for tele-underwriting. This means instead of obtaining a medical questionnaire for the client to fill in, the life office calls the client direct and goes through the areas of concern. Some firms have used underwriters or even nurses at this stage.
• Full - a cut down version of the application is submitted on paper or online. A specialist department, staffed by trained tele-underwriters, deals with the case. The tele-underwriters will contact the applicant and go through the risk questions (medical, occupation, pursuit and lifestyle) with them. If applicable, they will ask detailed drilled down questions to elicit more specific disclosures. At the end of the call acceptance terms can be conveyed.
Evidently, those offices that adopt the full tele-underwriting model are likely to see much greater usage of the service than those that adopt the partial or ad-hoc models.
But so far in the UK, no more than one or two players have adopted the full tele-underwriting model. This is expected to change in the future, but any office thinking of implementing a full service needs to go through a careful and systematic planning process.
This involves making a decision as to whether the service should be provided in-house or outsourced. A firm's approach to risk management is a key driver in this process. The life office also needs to be prepared to invest in an expert underwriting system and develop a strategy to optimise the immediate acceptance rate. Call centre technology is vital, as is outbound calling and the ability to provide a scheduling tool. In addition, firms need to develop a new breed of call handler. These are not your normal call centre staff used to dealing with in-bound policy enquiries, there is a particular set of soft skills required to handle the sensitive information gathered over the phone and still control the pace of the call.
Standard practice
Launching a full tele-underwriting service is not something that can be done overnight and it requires a significant level of investment, both in terms of time and money.
It took at least a decade from its first appearance for tele-underwriting to become standard practice in the US. It is probably fair to assume that it will take a similar time period for it to become commonplace, in its full form, in the UK.
But as tele-underwriting grows, it will become more important to have clear definitions of what the service actually is. Undoubtedly, at the moment, it means different things to different people, due to the various models being used.
This ties in with the last question that was put to the panel of industry protection providers. When asked whether they thought that "agreed tele-underwriting standards and protocols are needed in the industry," all agreed that they were.
But what sort of protocols are needed for tele-underwriting? Obviously, there could be dozens, but the most important points are:
• Providers need to ensure they are maintaining confidentiality at every stage of the process.
• They need to ensure they explain to the customer what the process is and still remind them of their obligations to give full disclosures and the consequences of non-disclosure. This means that all the normal warnings that appear on the application form are contained in the script in some format or other.
• The intermediary cannot be excluded from the process and needs to be kept informed of the progress of the application. This is especially important when it is not possible to offer terms to the customer.
• All calls should be recorded and retrievable.
• There should be a means to replay the information captured during the call back to the customer to ensure that it is accurate.
When all of this is done, tele-underwriting can provide a win-win situation for all parties. Brokers spend less time form-filling and more time on providing their expert advice, while clients can provide information to providers via a secure, confidential method. Both parties will experience a faster, more efficient process. Providers will also experience a wealth of benefits - with tele-underwriting applications providing more extensive and detailed information, there should be a downward pressure on non-disclosure rates.
This, in the long-term, will make reinsurance rates cheaper, which could eventually be conveyed back to clients in the form of cheaper premiums. Ultimately, if a reduction in non-disclosure rates can be maintained, and there is a commensurate drop in disputed claims, providers could even look to remove the need for routine medical evidence altogether.
Debbie Kennedy is head of underwriting at AXA
COVER notes
• All eight of the providers questioned agreed that tele-underwriting would become the norm in the industry in the next few years.
• While tele-underwriting can be suitable for both clean applications and those that involve disclosures, such as complex medical histories, there has been a bias towards opting for tele-underwriting with more complex applications.
• So far in the UK, no more than one or two players have adopted a full tele-underwriting model.
