The launch of underwriting technology UnderwriteMe has been heralded by many as a revolution for the protection industry.
But are all insurers on board and can this technology really reverse the decline of protection sales?
According to advisers, application systems and processes for protection are outdated, cumbersome and lagging behind other areas of the insurance industry – which is a major barrier to sales.
“Among the biggest barriers to greater protection sales is the antiquated systems and processes that lurk behind any quote,” says Michael Aldridge, sales director at mortgage brokers London & Country. “These barriers are becoming more acute over time as every other part of the insurance industry moves forward and embraces new technologies to improve the customer journey.”
In the current application process, advisers can obtain initial price quotes, but these do not take account of health conditions. For customers with medical problems, advisers have to telephone a number of providers’ underwriting departments to get a feel for accurate prices. They then start the application process with one provider, during which the price could change again.
Aldridge says quotes are a “best guess” and can bear little reflection to the final price, while the whole process can take months.
He says: “Couple this with the fact that protection is not a subject everyone wants to discuss openly and throw in one or two scandals it is no wonder people aren’t falling over themselves to take out cover.”
With UnderwriteMe, advisers ask customers a series of health questions at the start of the application process. UnderwriteMe then provides a detailed price comparison, including policy details and whether further medical evidence such as a GP report is required.
Martin Werth, chief executive of UnderwriteMe, says the technology automates the process and effectively “brings underwriting forward” so it is done before selecting an insurer rather than after.
“This allows an adviser to make a more informed recommendation,” he says.
Emma Thomson, life office relationship director at LifeSearch, says UnderwriteMe will speed up the application process and allow advisers to truly compare insurers.
“UnderwriteMe also means that when we recommend a client applies to one insurer for life cover and another for income protection, we can submit just one application,” she explains. “Insurers that currently might miss out on business because they don’t have the cheapest base rate, but have favourable underwriting, will benefit.”
UnderwriteMe launched last month with four providers: Exeter Family Friendly, Scottish Provident, Scottish Friendly and SunLife. It says a further three insurers will be using the technology by the end of the year, and it expects a full comparison service with the majority of providers to be up and running in early 2015.
Werth says providers first need to use the software in their underwriting systems before a comparison service can be launched.
He explains: “Our comparison service means customers are effectively answering questions on a number of insurers’ extranets simultaneously. But we need insurers to use our system in order to do that.”
The service will be free for advisers while providers are charged per completed sale.
Werth says insurers have shown “varying degrees of interest” in UnderwriteMe so far. He says: “As with anything, some will be earlier adopters than others, but when we bring the comparison service to market and can truly demonstrate how effective it is, we believe providers that have not yet signed up will change their view.”
Nick Jones, brand and marketing manager at Exeter Family Friendly, says: “UnderwriteMe introduces the possibility of an easy, common application process across insurers for the first time.
“Integrating the technology into our application process will mean advisers can benefit from a more streamlined process now, while the forthcoming comparison process has the power to revolutionise the customer and adviser journey.”
He says speed and convenience are the crucial ways in which the technology will change the process for the consumer.
“We cannot underestimate just how much the way we buy products and services has changed over the last decade,” Jones says. “We all have access to buy almost anything at the click of a mouse and have it delivered to our door within 24 hours, yet protection can take weeks to ‘deliver’ – that is just not going to cut it.”
However, some providers are yet to be convinced of the benefits of UnderwriteMe.
Aviva and Legal & General have both voiced concerns over the number of application questions.
Robert Morrison, chief underwriter at Aviva, says: “Our current application process is built around simplicity and speed, and around 80% of Aviva life insurance customers are accepted without the need for further underwriting.
“We are open to new ideas and partnering with different organisations, but we need to be confident that the end customer is getting the cover that is right for them with the most appropriate underwriting decisions. This may not always be possible with a standard set of questions.
“We also need to consider the ease of obtaining cover when a standard set of questions is used. For these reasons UnderwriteMe may not be in the best interests of our customers at this stage.”
An L&G spokeswoman says because UnderwriteMe will result is a longer journey for customers without health conditions.
She says: “L&G’s point-of-sale decision rate for advisers is 83% for life and critical illness products. Why have all customers embarking on a longer journey when the majority of those customers get the same premium as originally quoted, at the point of sale?”
L&G says it will keep the UnderwriteMe proposition under review.
Louise Cuming, sales and marketing specialist at protection comparison technology firm Total Systems, agrees that underwriting at the point of application will only benefit a minority of customers.
“Depending on which insurer you talk to, about 60% of applicants do get standard rates, so those customers will now have to go through a much longer up front process, which may put them off,” she says. “In addition, there are some customers with such complex health needs that insurers will request further information before offering a price even with UnderwriteMe.”
But advisers say UnderwriteMe will be less effective if not all insurers sign up.
“Unfortunately UnderwriteMe will be less effective without all, or at least most, insurers on board,” says Thomson.
“There will still be benefits even if only some insurers are on the comparison service which is why we still plan to work with UnderwriteMe. But the efficiency savings will be reduced if key insurers do not sign up and this is a real shame as UnderwriteMe’s technology has huge potential for the market.”
Werth agrees that the key concern for advisers will be whether the providers they use most often are signed up to the service. He says: “We need to ensure that the scope of providers is broad enough and the quality of service is good enough that this is not a risk.”
Others argue that UnderwriteMe will not be enough to solve the protection market’s woes, as it will do little to boost demand for products.
Jones says: “The protection market is facing some serious challenges, with low engagement from consumers and advisers leading to declining sales. For the market to succeed we need to overcome the big hurdles that have held demand back – and the application process is just one of them.
“UnderwriteMe is part of the overall jigsaw that will help boost sales, but we still need to find a way to engage with many more consumers about protection – this will just help process them effectively once we have done so.”
But Aldridge argues UnderwriteMe could help to boost sales through the impact it will have on the attitudes of advisers.
He says: “Consumers can get hugely put off if the outcome is not as originally quoted and will be reluctant to go through the process of applying for protection again.
“A process which is more efficient and gives quotes that reflect the actual price paid will make advisers more likely to have a protection conversation with confidence and conviction, which should lead to more consumers taking out cover.”
Peter Chadborn, director at advice firm Plan Money, says: “Consumers’ expectations cannot be managed from the outset and often they do not get what they thought they were applying for, which is a very real barrier to buying protection. Added to that, the adviser’s remuneration may not reflect the work they have done or they may not get paid at all.
“Tinkering with product design will have no impact on increasing public engagement with the protection industry. What is needed is a game-changer such as UnderwriteMe.”
UnderwriteMe also has plans to work with comparison websites next year which could help to boost the profile of protection further.
“It is logical for UnderwriteMe to work with comparison sites and this will create greater competition for advisers,” says Chadborn.
While UnderwriteMe may not be the solution to all of the protection industry’s woes, it should go a long way to improving adviser and consumer apathy, and ensuring the industry keeps apace with the demands of today’s consumer.