Although it is possible to take out anything from motor insurance to an Isa in a matter of minutes, purchasing life assurance, critical illness or income protection can take weeks, especially where someone does not have the cleanest bill of health.
The nature of the information required is what proves particularly challenging. Unless someone is fit and healthy and has no issues with their family history, insurers will want to find out more details about any medical problems they might have. This can mean further questions and, in a small number of cases, a report from the applicant’s GP or even a medical examination.
Insurers have already taken significant steps to streamline the application process. The introduction of tele-underwriting, where as much medical information as possible is collected over the telephone by a trained interviewer or medical professional, has helped to reduce the turnaround time for applications as well as increasing disclosure.
Application frustrations
Even with this though, there are still concerns around the application process. Roy McLoughlin, partner at Master Adviser, says the current process can be particularly frustrating as, in many cases, the first price offered is rarely the one the client ends up paying for cover. “An adviser will search the market for the best possible price but they can look stupid if they then have to go back to the client and say the insurer wants to charge a higher price due to a health issue. It is embarrassing: the systems are prehistoric,” he says.
Part of the problem, according to Mr McLoughlin, is the price war in the protection market. With insurers keen to appear at the top of comparison tables, the price they initially quote is based on someone in perfect health. If you suffer even a minor health complaint or have a less than straightforward family history, the premium will be loaded to take this into account.
As well as causing frustrations for advisers, it also raises concerns around treating customers fairly. While the insurer may have offered the most competitive price for a clean life, throw in a variety of health issues and they might slide right down the tables. This means that, unless an adviser completes the underwriting process with all insurers, they might not be recommending the most appropriate cover.
On top of this, while there are clearly some ethical concerns around the current application process, the length of time it can take to take out cover can turn a client completely off the idea of protection. Nick Jones, brand and marketing manager at Exeter Family Friendly, adds, “Nowhere else in the world would I be happy to wait a week or more before I can buy something. Consumers expect to be able to make a purchase quickly and easily.”
Technological advances
Finally though, the protection market has developed a way to address these issues. UnderwriteMe, a joint venture between Pacific Re and a team of protection specialists including former Ageas Protect managing director Martin Werth, has designed a technology platform that enables advisers and consumers to see the effects of underwriting in real time.
To do this, UnderwriteMe takes insurers’ medical and underwriting rules engines and incorporates them within its own systems so that pricing can be adjusted throughout the application process. This means a user can find out quickly what the final price would be or if they would be declined or required to provide further information.
The comparison service was launched at the end of August and is currently being piloted by LifeSearch. It holds details for seven insurers – Scottish Friendly, Exeter Family Friendly, Royal London, Partnership, Canada Life, LV= and Old Mutual Wealth – with UnderwriteMe planning to extend this list over the next year.
The ability to sit on this comparison site was a major factor in Canada Life’s decision to return to the individual protection market this August. Paul Avis, marketing director at Canada Life Group Insurance, explains: “By combining our products with UnderwriteMe, it enabled us to come to market quickly with straight-through processing. The application process has been a barrier to sales but we believe this is the future of protection.”
As well as the comparison service, insurers can also use the service behind their own application processes. This is the case at Exeter Family Friendly, where it was introduced to the insurer’s income protection application process in 2014.
It has seen a number of improvements already. As well as being able to deliver an instant decision in 70 per cent of applications, it says the application process is now three times faster than on its old systems. “We still offer advisers traditional underwriting and tele-underwriting but we are encouraging them to move to the UnderwriteMe application process,” adds Mr Jones.
Insurer resistance
While these companies are pleased with the results they have achieved, there is some resistance to the new service. Unfortunately for UnderwriteMe, among those that are sceptical about the benefits are protection giants Aviva and Legal & General.
For Russell Whitworth, underwriting and claims director at Legal & General, moving to UnderwriteMe would mean a longer process for many of its customers. “Why have 100 per cent of customers embarking on a longer journey when 90 per cent of them get the same premium originally quoted at point of sale?” he asks.
As further evidence to stick with its existing application process, he points to further statistics including a point of sale decision rate of 83 per cent for life and critical illness benefits, and a need to seek medical evidence from just 10 per cent of its customers.
Aviva has also stated that UnderwriteMe may not be in the best interests of its customers at this stage. Like Legal & General, it is able to accept around 80 per cent of applications without the need for further underwriting, making it reluctant to switch to what it also sees as a longer question set and potentially a lower acceptance rate.
Market revolution?
But with both of these insurers happy to continue monitoring the UnderwriteMe proposition, any decision to adopt it may come down to the broader benefits it delivers.
As well as enabling companies to come to market quickly, as was the case with Canada Life, Phil Jeynes, head of sales and marketing at UnderwriteMe, believes that, by removing the IT and administration burden from underwriting, it will lead to more product development. “An insurer can use the system to run a previous month’s quotes with different underwriting rules to see how this might affect their book of business,” he explains. “This can significantly cut down on product development time.”
Many are also predicting that a more streamlined, consumer-centric sales process will help to drive up sales of individual protection products.
Certainly UnderwriteMe’s comparison service is likely to prove popular among the aggregators. While they have fully automated product comparisons on everything from credit cards to home insurance, selling even the simplest form of life assurance through these channels has always proved difficult, often requiring a customer to input their details and wait for an adviser to call.
Although this might push up direct sales, Mr McLoughlin also believes it will lead to more sales through advisers. “At the moment an IFA who occasionally dips their toe in the protection waters will never feel comfortable they are recommending the best product,” he says. “Being able to access real time underwriting in this way will make them much more confident about offering protection advice.”
While higher volumes of sales are yet to materialise, with insurers already seeing improvements in their application processes, the protection industry and its customers should soon start to reap the benefits of technology.
