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The Actuary The magazine of the Institute & Faculty of Actuaries

Pre-application: a one-stop protection shop

Phil Jeynes looks at the customer journey when applying for protection insurance, and asks what can be learned from other industries while growing the market in the process


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Photo: iStock
We in the protection sector are a funny lot. On the one hand, every meeting, conference, blog and presentation bemoans the stagnation of our market and the lack of real innovation. On the other hand, we are quick to heap praise on what might, in other industries, be seen as fairly mediocre success. A prime example of this is our pride in the fact that the vast majority of applications are now entirely electronic, putting an end to lengthy paper documents and things getting lost in the post. It is unlikely that our customers – be they the policyholder or intermediary – share our excitement in having brought our processes up to speed with where others were at the turn of the century.

One of the key reasons protection sales are not where even the most pessimistic of analysts believe they should be remains our front-end sales process. The industry must market itself more effectively and demonstrate its worth through good news messages and positive claims stories, but the marketing budgets being ploughed into these endeavours will be wasted if the first experience for a new consumer is what we currently provide.

Irrespective of the channel, what we show interested parties is a ‘quick quote’ view of the products available, having neither asked for, nor received, relevant information about the clients’ health, preferences or needs; allowing price (and perhaps brand) to dictate where the real conversation takes place.

This is the point at which we throw our prospective client across to the extranet of their chosen insurer, who must begin the job of discovering whether or not they can deliver the price they initially offered, or whether they even want their custom at all. Many potential sales lose their impetus, as the unforeseen hinterland of medical questioning, further information gathering and actuarial algorithms wends its way towards the destination of a genuine premium, for those travellers determined and hardy enough to survive the ordeal.

Having eventually seen the real cost of cover, our bewildered friend is met with a choice. To take what has been offered or to start their journey once again with another insurer from their original list of lowest possible premiums; answering a distinct – but, to the untrained eye, extremely similar – set of questions, cheerfully coloured in another brand’s hues.

Over the years we have obsessed with reducing the number of questions we ask enquirers before displaying a premium to them, worried that the fatigue of the task will dissuade an already sceptical customer, but we have missed the point and failed to learn from our cousins in other areas of insurance.

Motor insurance is often seen as an unfair comparison, since the protection it offers is mandatory, but it remains a hugely competitive marketplace wherein online efficiency is crucial. Imagine answering far fewer questions before getting your annual premium, choosing the insurer you feel offers the best combination of price, cover and trust and only then divulging key details, such as the vehicle you want to insure, your driving history and endorsements. As a consumer, what benefit would you derive from this topsy turvy way of arriving at a genuine price?

Far from alleviating your fatigue, this method would be immensely frustrating and require you to input the same (or very similar) pieces of information multiple times before you felt you were seeing an accurate comparison between insurers. This is the reality protection customers are facing. We underwrite one insurer at a time and expect the intermediary or the customer to navigate many different, yet strikingly similar, journeys. 

Pre-application underwriting is a means of moving that process forwards, giving users a single journey while underwriting multiple insurers in real time in the background. It then allows a ‘buy now’ option without forcing them to re-input any data or visit a separate website.

At present, underwriters finely hone their question sets and worry endlessly about the phrasing and positioning of each stage, yet they are hamstrung by 20th-century legacy systems when it comes to the crucial aspect of adapting their responses, often having to wait for IT resources before implementing changes.

In reality, intermediaries and customers are not in the slightest bit concerned about who devises the questions or in which order they are asked. They simply expect that the number of questions will be reasonable, the phrasing clear and the path intuitive; only asking about specific areas if there is a need to do so.

Their experience of other sectors – be that financial services or retail – is that one brand owns the journey with multiple providers offering their product at the end. That brand could be an independent financial adviser (IFA), a bank or any other third party. The provider can then, having all the relevant data, seek to entice through the usual combination of quality, price, brand and reliability. In simplistic terms, think about buying a TV from an online retailer – multiple products from various providers, offered through one standard user experience. 

Figure 1: Research results on the way advisers quote for protection

I have heard people say that upfront underwriting removes a competitive aspect of the buying process – this could not be further from the truth. Currently, price is the overwhelming focus at point of sale, since an underwriting ethos has yet to come into play. Pre-application underwriting does not impinge on individual insurers’ underwriting philosophy, nor does it force insurers to expose their rules to their competitors. Digital technology allows multiple rules engines to feed into a single user experience, as elsewhere in the insurance world. This seems magical to those of us confined to the protection market, but to our customers it is nothing more than what they expect.

In fact, pre-application underwriting will expose more areas of differentiation for insurers than ever before, since the improved process, coupled with up-to-date gathering and interrogation of management information will permit real-time, dynamic changes of underwriting philosophy and the chance to offer distinct terms to each customer rather than an ‘off the peg’ premium to all.

Similarly, the fact that we will no longer expect intermediaries or direct clients to input the same set of data multiple times will move the conversation into product comparisons like never before. Like it or not, many intermediaries still have their favourite insurer, based commonly on their familiarity with the login process and question-set of that provider. This should and will change when the journey is a singularity. 

In theory, today’s IFA must call all insurers’ underwriting departments to get a pre- application decision based on a client’s disclosure, thereby getting a feel for the impact it may have on the prices offered. 

In reality, most have neither the time nor inclination to contact more than three or four providers – still a considerable chunk of their time. Pre-application underwriting removes this anachronistic and imprecise barrier to sales, showing the adviser genuine, underwritten terms for which they can apply without repeating the questioning exercise with their customer. Our research (Figure 1) shows that 75% of advisers would sell more protection if the process were streamlined in this fashion.

There remain some who question whether pre-application underwriting will catch on. 

In reality, the proverbial genie is not only out of his bottle, he has already started granting wishes. It is deeply unlikely that, given the obvious and numerous benefits for our customer base, he will be encouraged back in.

The real question insurers should now be asking themselves is: do we want to be running to catch the bus as it leaves the station, or do we want to be on board at the outset, helping to determine its destination?

Phil Jeynes is head of sales and marketing at UnderwriteMe