Insurance is effectively a social contract in which it is agreed that the many will subsidise the few. And as medical science advances year-on-year, so both individuals and underwriters have a far better understanding of who those few claimants will be.
In some quarters, the challenges involved in obtaining medical details mean the pandemic has seen a return to a more human approach to underwriting by providers. Generally speaking, however, the underwriting process has become more automated in response to changing circumstances.
Providers have been improving instant acceptance online by creating more bespoke and innovative questions to capture more information.
This dynamic underwriting approach means that insurers can offer a much higher straight through processing rate.
So, does more automation and more information allow insurers to price more accurately?
“This is an interesting question,” Naomi Greatorex, managing director Heath Protection Solutions, says. “I think sometimes the online underwriting system seems to offer a loading where an adviser may feel that the rating is borderline and there are some additional facts that a underwriter may have considered and the system cannot.
“In these instances I have seen premiums being rated, and following a conversation with an underwriter who has reviewed the additional information, the rating is reduced or removed. Automation and straight through processing does allow insurance companies to offer more competitive premiums, as the cost of processing the insurance has been greatly reduced for people that can be instantly accepted.”
But as a result, many people cannot be accepted through online routes. This is when advisers and underwriters need to be understanding of individual circumstances.
Many underwriters are very open to discussion about a client’s risk, why decisions are being made and also the information that they need to fully make an assessment.
Kathryn Knowles, managing director of Cura Financial Services, adds: “Online journeys come across as cheap, because you are getting people covered this way, in a ‘straight through’ [manner with] no underwriting risks. As soon as someone has a risk that cannot be easily integrated into the system, they have to go through a more bespoke process.
“This doesn’t mean that online journeys are cheaper, it just means that people who can access cheap protection cover can easily do so through this route.”
Greatorex adds: “The more we move towards automation within underwriting, the more important it becomes to speak to a protection specialist, particularly for clients who have medical disclosures. More people could be excluded if we rely solely on a more automated system, and do not help people access advice.”
Another danger with a solely online strategy coupled with an insurer’s increasingly sophisticated ability to capture more information than ever before - albeit a standard set - is that it risks excluding more people from getting insurance, as systems cannot take into account or consider the complexities of a person’s circumstances