Is moratorium the solution to drowning in postponements, declines and a sea of pipeline applications?
We are all facing unprecedented challenges right now. Some insurers are coming up with good ideas around the current crisis, while some others may be struggling.
The best ideas are usually the simple ones. The obvious ones that everyone adopts. And while it's great that insurers are coming up with new ideas, most advisers don't want insurers trying to out-do each other on all the tiny little details and creating a COVID-19 race to the top.
Last year, I talked about an idea that could grow the market significantly while also reducing work.
We have enough on our plates, so keep it simple.
And although it may need a change in how we think, it's an option that could help just about everyone in the market right now, including our customers. What if every application - life, critical illness (CI) and income protection (IP) - was put on risk with cover in place from day one? As I said at the time: Game. Changer.
Let's consider the details… Full cover straight away, a short set of underwriting questions, premiums collected and a pre-existing condition exclusion (PEC) until the underwriting process has been completed (including COVID-19).
How much time and money could we all save? How many new policies could we all start? How many clients would we lose during the underwriting process if they're already covered?
When the underwriting decision has been made, the client has three options:
- If the decision is unchanged, the policy simply continues at the same price with the PEC removed. That's a nice communication to send and could be tied in with something like placing the cover under trust or setting up a will.
- If the underwriting decision is different, such as a loading or exclusion, the customer can choose to accept the underwriting decision and remove the PEC. Or keep it as it is.
- Or, if the decision is different but the premium is unaffordable, the policy could continue as it is, with the PEC still included (and no change to the premium/terms). Or the sum assured/term could be reduced to match the pre-underwritten price.
This is a simple solution and the benefits are significant for the industry because it removes the need to keep people engaged during the application process. The advice/sale process becomes much easier and the underwriting ‘journey' changes from being a time-consuming psychological barrier, to something that happens in the background after your policy has started.
Unlike many people, I'm a fan of PECs. While I completely understand the inherent restrictions, I also recognise that most people won't end up with them and in the current crisis they could be a quick solution to a much bigger problem, serving the greater good.
Imagine a protection industry where every client was accepted, every policy gave clients cover immediately, premium collection from day one, commission paid much earlier, leading to more conversions and less admin. Mmm... dreamy! It is possible, but we need a change in thinking.
Ian Sawyer is commercial director of Assured Futures
Effective 6 December
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