Are insurers explaining underwriting decisions adequately?

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Are insurers explaining underwriting decisions adequately?
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While awareness and engagement can help to address the protection gap, for people with medical conditions or disabilities, obstacles to protection can come at the underwriting stage.

In a bid to support applicants and improve transparency, a cross-industry commitment to explain underwriting decisions when an insurer offers non-standard terms, or is unable to offer cover, came into effect in December.

According to the non-statutory agreement, it aims to ensure that people with pre-existing conditions and other potentially vulnerable customers are “appropriately supported throughout the application process, as well as increasing their trust that underwriting decisions about them are being made fairly.

“It also aims to enable customers to navigate the insurance market more confidently and effectively and ultimately to find affordable and appropriate cover.”

The need for transparency

More people are likely to accept the terms they are offered if they better understand why a provider has reached a particular underwriting decision, says Duncan Mosely, chief operating officer at Guardian.

One of the details in the agreement is that if a customer provides explicit written consent, the insurer “should discuss, in detail, the reasons for the underwriting decision with the distributor. This may include information that the distributor was not aware of when submitting the application”.

Naomi Greatorex, director at Heath Protection Solutions, says that as a specialist advice business, she discusses medical history in detail with clients.

“However when information comes back from a GP report or medical that we did not detail on the application, it feels like the adviser is shut out.

“I think not sharing the new medical information with the adviser causes delays to clients getting cover, and means that advisers struggle to give their clients the best solution on what the next steps should be.”

How have insurers implemented the agreement?

Among the details of the agreement are that insurers will broadly explain what underwriting is and why it takes place, and if requested by a customer, explain what information was used to make the decision and why.

For some insurers, the agreement enhanced and formalised existing practices.

Scottish Widows says providing transparency in decisions when non-standard terms are offered has always been part of its underwriting process.

“Our work with the Access to Insurance Working Group, and the subsequent principles agreed on transparency of underwriting decisions, resulted in us enhancing this process further to support the agreed key principles,” the provider adds.

Clive Morris, chief medical underwriter at MetLife UK, also describes the agreement as an extension of the provider’s current practices.

“[It] encourages us to go further for our clients when providing transparency and support, as well as constant empathy and understanding of their situation.”

And Vitality says that no significant changes to its processes or new training were necessary: “We have always adhered to the agreement’s principles, even prior to becoming a signatory.”

Moving away from technical jargon

The agreement also states that communications about underwriting decisions will always be “empathetic, respectful, free of stigmatising language and appropriate.

“Insurers will also be mindful that communications can affect an individual’s health. They should be specific to the individual customer and consider their information needs using plain and simple language and avoiding technical jargon.”

LV says a challenge for underwriters across the industry is shifting their style of language from technical, medical terms that are used during an underwriting assessment, to a plain and empathetic one when engaging with a customer.

“This shift can be challenging, but our underwriters have adapted well and receive regular coaching to support them in delivering the principles of the agreement,” the provider adds.

As a result of the agreement, Nicky Bray, chief underwriter at Zurich UK, says the provider reviewed the style and content of its correspondence to customers.

“This has involved people from across the business, including a qualified nurse from our rehab team,” Bray adds.

Other providers have also assessed how they communicate to customers. Aegon, for example, says it reviewed the tone of voice in its written communications.

And Jennifer Gilchrist, protection specialist at Royal London, says the provider has removed “harsh” terminology such as ‘decline’ and replaced it with ‘unable to offer cover’.

It’s a significant and very human moment when we have to tell someone that we can’t offer them protection insurance or that we intend to charge them more.Helen Croft, AIG Life

AIG Life has taken similar steps as a result of the agreement, by removing jargon such as ‘decline’ and ‘postpone’ from customer letters, to likewise use the phrase ‘unable to offer insurance’ instead.

Describing the task of communicating a decline or loading as a significant and “very human” moment, Helen Croft, head of underwriting strategy at AIG Life, says: “What we are actually saying to them is we’ve assessed you are more likely to die or get ill than other people. How underwriters deliver that message to the person applying for insurance is therefore really important.”

Room for improvement remains

Alan Knowles, managing director at Cura, which specialises in high-risk protection, says: “It's great to see some insurers adopt the points within the agreement, however not all insurers appear to have fully embedded this yet. We are still seeing some very basic decline letters being sent to clients.

“We also saw an example where cover was postponed and a client was told they need to go see their GP as something came up on their medical screening, but they were told nothing further.

“This left the client extremely worried about what was wrong. It turns out it was just relating to his blood pressure, which could have easily been explained to the client to ease his concern.”

But Knowles adds that, on a positive note, most insurers have sent more detailed reasons when asked.

“I saw an excellent example from Aviva recently, where the underwriter really took the time to explain why they couldn't offer the cover, and went into more depth than just saying the client had a medical condition, while also not overcomplicating it.

“It helped the client understand and also helped us determine what we should do next.”

Advisers at The Insurance Surgery, which likewise specialises in protection for high-risk customers, have also found that communication from providers is generally lacking.

“Our advisers regularly struggle to get detailed reasons for the loading or decline of their customers' applications,” says Alex Monteith, digital marketing executive at The Insurance Surgery.

“Due to the Data Protection Act, providers cannot share customer data with us if we did not already know the disclosure, which we fully understand and do not criticise the providers for.

“However, most of the time we are fully aware of our customers' medical history, and we are still refused an explanation from providers.

“Decision emails and letters are often quite generic and blunt, and their language could be a lot more empathetic. This becomes frustrating as it hinders access to insurance for our customers and prevents them from getting the life insurance they need. 

“Furthermore, providers don’t seem to signpost to other providers or specialists if they are unable to offer cover.”

This is a journey rather than a destination, and there will be more to do, but these are definitely steps in the right direction.Peter Hamilton, disability and access ambassador

Commenting on the agreement’s progress, Peter Hamilton, head of market engagement at Zurich UK and a disability and access government ambassador representing the insurance sector, says: “The aim of the changes was to provide greater transparency and to communicate with customers with more understanding, sensitivity, and compassion. Some of that will be process driven, some will be the language used.

“We also want to encourage insurers and advisers who find cover difficult to place for particular clients to signpost those customers to advisers who specialise in complex cases, or to other insurers who may have different risk appetites. It is hard to go to any industry event now where signposting is not mentioned, which in itself is evidence of progress.

“The changes have been developed alongside the implementation of the Association of British Insurers' best practice standards on mental health, and they have aligned objectives. At the same time, insurers continue to enhance the way they support vulnerable customers, which will include signposting to charities or other agencies and more.

“This is a journey rather than a destination, and there will be more to do, but these are definitely steps in the right direction.”

Chloe Cheung is a features writer at FTAdviser