What impact has increased transparency had on underwriting?

But now, if there’s no need to obtain a GP report, advisers can take people through from the product recommendation phase to actually putting them on risk in a single session.    

Peter Hamilton, head of market engagement at Zurich, says: “The move to electronic underwriting has made a huge difference and has meant instant decisions in the majority of cases. 

“We take it for granted, but there are many markets in the world where it’s much less well developed.”

Another major historical landmark was the introduction of tele-underwriting in the mid-2000s. 

By enabling medical questions to be handled in confidence via a phone call with a nurse or underwriter, this avoids the need for applicants to disclose sensitive personal information to their advisers – helping to combat non-disclosure. 

Other more recent developments have tended to constitute stepping-stones rather than quantum leaps. 

Eric Purdy, independent protection consultant, says: “The basic underwriting approach hasn’t really changed over the past decade or so, as it’s still about looking at the likelihood of someone dying or becoming ill during the lifetime of the contract. 

The move to electronic underwriting has made a huge difference and has meant instant decisions in the majority of cases.

“But we are seeing that longevity has stopped improving as a result of lifestyle changes reducing life expectancies.”

Claims transparency

There has, however, undoubtedly been a gradual evolution in the transparency of the underwriting process. 

The origins of this can arguably be traced back to when protection insurers started publishing their claims statistics some 15 years ago, but the main push has been more recent. 

Anna Rogers, head of underwriting and claims at LV, says: “During the last five years the industry has been very proactive in showing exactly what we do. The underwriting process had been largely unknown to advisers, and it was quite hard for them to find out why customers received adverse claims decisions.    

“But we realised we needed to do more to earn the trust of advisers and consumers, so underwriters are now sharing guides with them, which really helps to set expectations. Industry standards, like the ABI’s recent standards on mental health, have also been useful.”

Better decision making

Pre-underwriting tools launched by the likes of LV, Royal London, Scottish Widows and – most recently, this January – by Zurich, have also helped manage customer expectations by allowing advisers to obtain an initial indication of the terms that non-standard health risks might be expected to receive post-underwriting.  

Hamilton says: “Where information is not available, our new tool enables advisers to skip questions, and standard assumptions are applied, speeding up the application process. 

“All pre-application indicative decisions are saved in a dashboard with a unique reference number, enabling advisers to revisit and edit cases later as well as using the reference to help identify the case if they wish to discuss it with an underwriter.”

Purdy adds: “This increased drive for transparency generally has had a very positive effect, speeding things up and enabling underwriters to explain their decisions better, which has led to fewer disputes and less reputational damage for the industry.”

In terms of benefit to both efficiency and transparency, however, the most significant development of all has been the gradual evolution of underwriting rules engines that enable advisers to use fully-underwritten quotes from a wide range of insurers during the recommendation process. 

Ben Burgess, senior adviser at specialist intermediary LifeSearch, says: “Knowing a client’s full underwriting details when making a recommendation is often essential. 

During the last five years the industry has been very proactive in showing exactly what we do.--Anna Rogers

“Unless they are young and perfectly healthy, with no other associated risks such as hobbies or family history, a generic quote can be meaningless and offers no real insight into what the actual price might be or who might be the most suitable or cost-effective insurer.”       

Speed of decisions

UnderwriteMe, launched in 2012, has emerged as the most prominent of these engines, offering access to most leading protection insurers (although Aviva and Legal & General remain notable absentees.) 

As long as applicants do not require a GP report, it can produce a range of underwritten quotes in only 10 or 15 minutes.        

Robert Harvey, head of health and protection at Drewberry financial advisers, says: “UnderwriteMe is a tool we have dabbled with for a couple of years but since this January we have put a much more concerted effort into using it, as the amount of time advisers are having to spend on pre-sales research has increased immensely with COVID-19. 

“It’s particularly helpful being able to get quotes whilst on the phone with clients, asking them the set underwriting questions the system has built into its software. 

“Underwriting has been a bit clunky in the past, but this ultimately has the potential to make a massive difference to the advice process for advisers and consumers.”

Knowing a client’s full underwriting details when making a recommendation is often essential.--Ben Burgess

The main downside of UnderwriteMe is that it still doesn’t offer whole-of-market access. But Peter Chadborn, director of IFA Plan Money, does not see a problem if advisers can say it covers most insurers. 

He says “I tell clients that it covers a broad enough representation of the industry that I’m happy with as their adviser. If you don’t always recommend the cheapest anyway, then what you can buy on UnderwriteMe is likely to be close enough, and you can always check on others via a portal.”

“By putting underwriting at the beginning, it basically aligns protection advice with other forms of advice, and this is important for the industry because it means we might be able to get more generalist IFAs to engage.“

Edmund Tirbutt is a freelance journalist