The evolving insurance underwriter

Underwriting is a continually evolving area and as a result insurers need to stay ahead of the game if they are to understand the changing insurance needs of our nation, writes Marcello Bertasso.

He who stops getting better, stops being good. This is the mantra of all good underwriters. However, good is a relative term, and something that is interpreted differently by everyone. Yet when comparing something good to something bad, it gains a greater level of context. 

As an example, a decade ago life insurers thought it was ‘good’ to fulfil a life policy in less than 30 days. Now it’s considered ‘not good’ if it takes longer than two weeks.

Over the past 10 years a great deal has changed for the average underwriter. Each component in isolation could be seen as relatively small, but when aggregated presents a more significant journey of change.

After all, this is what underwriters do – we consider all factors that influence the outcome of the policy we are underwriting. This includes factors that increase the risk of a claim, or reduce the risk of an early claim.

While there has been a great deal of change in the industry, not all of it has been on par in terms of impact. Some underwriting changes receive more attention, while others hit hard but are more transient, and some just continue on a path of evolution.

One area that received a great deal of attention was the 2003 bird flu pandemic and the more recent 2009 swine flu scare. As underwriters, we were asked to be ready to adapt underwriting practices to assess potentially impacted individuals, for example persons who were about to embark on a journey to a high-risk region.

Health scares such as these are spread more easily with the advent of an increasingly mobile world population. And with Australians being a gregarious bunch, travel comes as second nature to us.

This, of course, presented even more significant challenges for the underwriter in the last decade, especially since the September 11 attacks, and subsequent London and Bali bombings brought terrorism to our door.

These threats are an ever present reminder for how underwriting continues to evolve.

Fortunately for underwriters, not all change results in an increased risk of claim. Advances in medical diagnosis and treatment have improved mortality rates and recovery from serious illnesses. However, this is a double-edged sword.

Consider cancer. Most will agree that diagnostic techniques and treatments have improved outcomes for the affected, with patients surviving in greater numbers than in the past. Yet significantly, incidence rates (of newly diagnosed events and resultant valid trauma claims) have increased. This requires understanding from underwriters, product managers, actuaries and claims assessors.

These changes mean that the underwriting practices must keep pace with the burden of injury and disease that may arise after an application has been accepted and issued.

Not all health issues are improving though. This is evident from the statistics gathered in our annual risk report Claims We Paid, covering life insurance payouts by AMP in 2010. The report shows an increasing trend in the number of cancer and mental illness claims, mirroring national health trends and reinforcing the need for adequate life insurance and protection against trauma and disability.

The report showed mental illness as the leading cause for total and permanent disability claims at 15 per cent, almost doubling the previous year's figure. It also showed that cancer remained the most common form of trauma claims in 2010, representing 77 per cent of the $24.4 million payment figure. AMP paid almost $300 million in claims to its customers in 2010.

Our ever-expanding waistlines and the multiple health issues that can result from being overweight, as well as mental health issues, diabetes and increased rates of certain cancers are also an obvious cause for concern.

While underwriters have adapted their view of what’s acceptable in these various areas, they must work in partnership with product managers and actuaries to correctly assess the increased risks associated with global health trends.

However, not all changes in the last decade have been influenced by health matters. A good underwriter is always looking for greater efficiency and improved speed, and some of these features have come from technological improvements.

Technology such as automated underwriting ensures that customers are only asked questions relevant to their individual profile and the type of insurance they are applying for. By helping us deal with more straightforward applications, it ultimately allows us greater scope to offer alternative solutions to complex situations – resulting in our ability to insure more people with more cover.

As an industry, we compete on many facets. Even though price and service are key, product differentiation is also essential. This is a challenge for underwriters, as we must keep our assessment standards in place to handle a constantly changing product set, maintaining consistency between the electronic rules and the decisions of the human underwriter.

Even though the last few years have seen a number of significant changes, there is still one area that remains an unknown element with the potential for a huge impact in the future. I refer to the human race having mapped out the human genome.

As a result, thousands of new genetic changes, mutations, interplays and therapies have been discovered. Its impact on underwriting has been muted but sustained, but it’s what looms ahead which is both exciting and daunting for the underwriting industry.

On review, it has been a very rewarding decade and underwriters have grown and evolved. We’ve met the challenges head-on and I believe responded appropriately to them. Underwriters have also increased their professionalism, technical skills, social skills and improved their customer focus. We look at our processes end-to-end, always with the view of doing more with less.

The next decade looks even more exciting, never boring and filled with multiple opportunities.

Marcello Bertasso is head of underwriting at AMP.