Insurance in the digital age – has it lived up to its promise?

It has been a decade since the risk industry embraced phone and online underwriting. But has this technology delivered on its promise? Chris Kirby writes.

The common perception is that applying for life insurance is a long and complex process. The thought of spending many hours completing paperwork, on a subject that many of us don’t feel comfortable with, can be quite off-putting. 

One of the main complaints used to be having to complete a 30-plus page application form – dealing with some fairly searching questions about health, finance and lifestyle.

Fortunately, life insurers realised that simply by changing the way a personal statement is obtained, adviser and customer sentiment towards writing life insurance would also change. 

The solution to the arduous form completion process was to introduce a choice of telephone-based underwriting services and online underwriting capability to allow customers to complete and lodge their personal statement directly with the life office, in a style that best suited them. 

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Most life companies today offer either or both of these solutions and many advisers have adopted and embedded these new practices into their business. 

The promised benefits of these new ways of applying for insurance included reduced processing times, improved underwriting consistency and a reduction in the amount of medical evidence required.  

It has now been about 10 years since the industry embraced this technology – but have the promised benefits been realised? 

Has online and telephone underwriting delivered tangible benefits to customers, advisers and life companies? 

And, in the simplest measure of success, are advisers utilising these services? 

Initial expectations were that online and telephone underwriting would save both advisers and customers time. The common experience is that incremental time savings “upstream” have resulted in significant time savings “downstream”. 

Advisers and customers took some time to embrace the brave new world, but across the industry we have seen an ever-increasing take-up of online and telephone underwriting.

Over 75 per cent of all AMP financial planners now choose to lodge business using this method. 

The explicit time savings achieved by advisers outsourcing the completion of the paper personal statement can create a time saving of up to an hour per customer. 

The implicit time savings achieved through faster business completion have been of greatest benefit to financial planning practices.  

Obtaining better quality information upfront has reduced delays in completing business. Since introducing online and telephone underwriting, the vast majority of Australian insurers have seen a reduction in the time taken to place business. 

Certainly from a customer’s perspective, there has been a significant drop in the length of time taken to complete an application and personal statement.   

The second promise, of improved underwriting consistency, has been realised by most Australian insurers.

The importance of this is a fair, open and consistent process – vitally important when we are recommending someone something as critical as a life insurance contract.   

The final big promise of online and telephone underwriting was the potential reduction in the amount of medical evidence required.

There is no doubt that intuitive and qualified questioning of the life insured – utilised by the online and telephone underwriting services – has led to a reduction in the amount of additional evidence requested. 

We all understand that the faster and more streamlined the underwriting process, the more likely the business is to place. There are benefits to everyone concerned through making the process as efficient as possible.  

Customer disclosure has also significantly improved as a result of online and telephone-based underwriting and the importance of this cannot be underestimated. 

The fuller and deeper disclosure that a customer  provides not only assists the underwriters in making a quicker and more consistent decision; it also helps to mitigate the risk of issues at claim time - particularly with regard to non-disclosure.  

Automated risk technology has created wins for everyone. Decreasing end-to-end processing times means applications are approved faster and customers are more likely to finalise on their policy. 

A simple, transparent and customer-friendly process should also assist in removing some of the barriers to under-insurance that currently exist.    

Telephone and online underwriting have made a real and significant difference to the way advisers and life insurers transact life insurance.

These services have delivered substantial benefits, particularly around administrative savings, disclosure and first-touch completion.  

But as an industry, we also need to keep challenging what we do and look at ways to continuously improve the process. 

One area where improvements could be made is in the utilisation of the data we collect at both application and underwriting stages to ensure we are asking the right questions, making the right decisions and are treating all of our customers fairly.  

One thing we can all agree on is that we’re here to make sure people get the cover they need so they can ride out the unexpected - this should be a positive experience, right from the start.   

Chris Kirby is head of technical strategies for wealth protection at AMP.