There’s an old joke about asking for directions to a far-off place where the punchline is: Well, if I were you, I wouldn’t start from here!
It has a certain resonance with the underwriting of protection business because one thing we can all agree on is that it’s not perfect – and it’s a long way off from the best possible starting point to make things better.
When looking back at all the underwriting processes over the years, little has really changed. As an industry, we’ve put a paper form on a computer screen – that’s about the extent of it as far as most stakeholders are concerned.
Whilst attempts have been made to simplify products and processes (even going back to the 80’s with the short form applications associated with MIRAS) the reality is that we still have very long application forms, asking a myriad of different questions about health, lifestyle, occupations and avocations (that’s sports and activities to you and me).
We kid ourselves that by making this digital (putting it online) and creating an app (a tick box exercise) we have made it easier for the customer. Only then, when the underwriting engine has made a decision, we might also ask for a letter from the GP or tests via a medical screening.
Let us be clear, the underwriting process is an inconvenience to the customer. If it wasn’t why do so many people buy guaranteed over 50s plans?
Of course, the less you ask, the more the lovely actuaries will want to add to the rates. However, with a diversified portfolio this can be mitigated to a certain extent. Over 50s plans are slightly different in that there hasn’t been quite the same level of competition in this product to date as we’ve seen over the years with term assurance. Margins are typically higher as a result, although things are changing.
If we were starting over again, two things would need to change. First, we need to learn how to trust the customer. We ask for their trust when the policy is in force in that we will pay their claim and this should be a two-way street. In this age you could argue that people are more informed about their health than ever and there are various other ways emerging to check and monitor a policyholder’s activity, such as wearables, nearables, online banking and more.
Second, we should look at the current medical position of an individual rather than the broad-brush approach of always looking at the history via the GP records. These records can take a long time to obtain, even if eGPRs are used. If the customer has disclosed a condition, the chances are that they now have a good insight into the condition and how to manage it.
Likewise, if the customer has just undertaken a health screening or MOT, this should be used, and taking this a stage further, if we do ask the customer to undergo an examination and perhaps blood tests, this could be turned around so that we provide the results to the customer so that they have a record of the outcomes, which can easily be undertaken with better use of technology.
Underwriting is a necessary part of the risk selection process. Its integral to the performance of a company portfolio. However, look at it from a customer viewpoint and turn it to an advantage and provide a tangible benefit to them. Finger prick testing is a good idea, but we’re only scraping the surface of what is possible in terms of making it better for the customer.
Whenever we discuss the future of underwriting it is inevitable that advent of new technology will determine our future, but we all have an important opportunity to build this future and also to shape the future of the industry as a whole.