Understanding underwriters

UNDERWRITERS are often regarded as the curse of the adviser fraternity. Their sole aim appears to be to frustrate the process of getting business on the books.

They have an insatiable appetite for information: detailed application forms, supplementary questions, further clarification, GP reports and maybe medicals, sometimes with special tests. All of which cause delay, inconvenience and irritation for clients and, at worst, their deciding not to proceed at all.

In fairness, underwriting does serve a very important purpose. There has to be a form of gate-keeping where risk products are concerned, to guard against anti-selection, weed out non-disclosure and determine a fair price for the risk.

However, there is no denying that underwriting is time-consuming and not terribly friendly to intermediaries or their clients. That should change before too long, with cost being the key driver.

Underwriting is an expensive process. Against solvency concerns and the re-shaping of the distribution landscape, underwriting might be pretty small beer for life companies. However, firms wanting to stay in business long-term need a streamlined, efficient underwriting operation compatible with the 1 per cent world.

Low-margin products are here to stay and will become more common, helped by a powerful push from Ron Sandler. IT solutions company Marlborough Stirling estimates that the £26 a year it currently costs companies to administer a policy needs to be reduced to £10 to £15 a year to make headway in tomorrow’s world. That means looking at every aspect of the policy administration, from new business to payout, to see where fat can be cut out.

For underwriting this means:

•automating the process through software programs that integrate fully with administration systems, creating a process that works seamlessly for customers and intermediaries

•transferring responsibility for data input to customers and intermediaries as much as possible – provided there is an exchange in return, such as faster, better service

•reducing medical evidence costs by reviewing evidence requirements and then adopting new approaches

•removing pipeline blockages to avoid delays in acceptance

•reducing the proportion of not taken up cases

Transformed

Underwriting needs to be transformed from a strictly back-office function to one that extends, through the web, to advisers’ offices and lap-tops, and it is starting to happen, as shown in the graphic.

Some of these measures have wider benefits, which are important to running a modern, efficient, business. Streamlined, integrated processes means the better, faster service, that customers and intermediaries demand.