How innovation has changed underwriting

Steve Baldry, director of underwriting at UnderwriteMe, says: “I believe the protection buying process is no different. 

“This consumer need has driven the requirement for insurers to provide customers with immediate online insurance decisions backed up by seamless, speedy processes.”

Industry portals can now offer limited underwriting questions and individual insurers have invested hugely in platforms to ensure they can provide as many immediate online point-of-sale decisions as possible.

For example, Legal and General reports it is able to give these on 83 per cent of life and critical illness applications and 80 per cent of income protection applications. 

But, while no one denies that underwriting innovation is valuable, not everyone thinks it is the be-all and end-all for achieving market growth.      

This consumer need has driven the requirement for insurers to provide customers with immediate online insurance decisions backed up by seamless, speedy processes.--Steve Baldry

Robert Morrison, global chief underwriter, health and protection at Aviva, says: “Remember that we start from a strong position of around 70 per cent to 80 per cent of protection customers industry wide getting an instant decision, so I don’t know if I agree that faster underwriting will grow the market. 

"I think it’s more about trust in our products and people knowing they will do what they say they do.

“So, I think the claims statistics that insurers issue are just as important as underwriting innovation because we are selling a promise and not something tangible like an iPhone or Sky Sports package which always gives you something back."        

Industry reputation

Trust is not something that technology is necessarily likely to advance, although innovation to make life easier for consumers and advisers during lockdown has certainly not done the reputation of protection insurers any harm. 

For example, insurers have been giving many individuals access to insurance they may otherwise have struggled to obtain by offering virtual medical screenings with nurses.   

David Banks, underwriting and claims director at Legal and General, says: “Since the roll-out last October we have carried out over 1,500 remote screenings and we are currently working on further improvements that will allow the functionality to be extended.”

Some insurers have been offering the ability for the adviser to ‘delegate’ underwriting to the customer – by sending them a link so they can complete health and activities questions in their own time – whilst others have been accepting electronic trust forms without requiring them to be followed up with a wet signature copy.  

The claims statistics that insurers issue are just as important as underwriting innovation because we are selling a promise.--Robert Morrison

However, the biggest barrier to significantly increasing the number of protection policies that can be instantly underwritten still remains. 

Alan Lakey, director of CIExpert, says: “The inability to gain electronic access to medical records remains a huge problem, particularly given lockdown. 

“Around 30 per cent of income protection and critical illness policies end up with insurers writing off for GP reports, but you can wait six weeks for them to arrive.

"I’ve even had one case that took 18 months. But electronic access should be instantaneous and would revolutionise the whole application process.”

GP reports

At least there has been partial progress in this regard as some GPs have signed up to more limited electronic services that cut the wait for GP reports down to only two weeks, or even less in some cases.

Medi2data, a facilitator of such digital medical reports, estimates that around a quarter of GPs that insurers are contacting are currently using the approach. 

More significantly, however, it predicts that the Holy Grail of instantaneous electronic underwriting could be just around the corner.   

Richard Freeman, founder and chief executive of Medi2data, says: “We now have the capability to take data directly from GPs’ records and put them straight into an underwriting rules engine system, and hopefully we will be able to launch a same-day service by the end of this year. 

"But the hurdle we must still overcome is gaining the confidence of GPs that the data will be handled appropriately.”

Underwriting later

Another hugely exciting potential development is the ability for people to take out protection policies instantly but have the underwriting done later.       

Around 30 per cent of income protection and critical illness policies end up with insurers writing off for GP reports, but you can wait six weeks for them to arrive.--Alan Lakey

This January Royal London launched such an option for the business protection and relevant life markets called Underwrite Later.

Policies are issued without underwriting but, as soon as the insurer has the necessary medical and other evidence (which can take up to six months), it can retrospectively impose additional terms and higher premiums. 

If all goes well, Royal London intends to extend the approach to the individual protection market. 

Zanele Sibanda, head of internal markets for Towergate Health and Protection, says: “I see Underwrite Later being a standard feature in the individual market in due course, and I think it’s a lot more viable than having a moratorium policy, which, as we have seen in the private medical insurance market, can lead to disputes at the claims stage.” 

We now have the capability to take data directly from GPs’ records and put them straight into an underwriting rules engine system.--Richard Freeman

Cross-industry evolution

Innovation is most unlikely to stop there, either. 

Eoin Lyons, chief executive of administration and technology provider OPAL, envisages a scenario in which, instead of advisers having to key in data, underwriting search engines will be able to take information from other sources like mortgage or rental applications or credit ratings. 

While acknowledging there are confidentiality and data protection issues to overcome, he expects it to happen within five years. 

Steve Casey, marketing director at digital healthcare company Square Health, doesn’t even rule out individuals who require protection policies putting their medical records on a platform and inviting insurers to bid for their business! But he acknowledges that this is “probably a few years away”.

Edmund Tirbutt is a freelance journalist