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Category Life Insurance

1Lifedirect - FAnews uncovers error

16 March 2006 Angelo Coppola

Oops! FAnews uncovers a huge error in calculating life cover premiums. Or was it simply a case of attempted social engineering and failure to keep promises, added to a system failure as assumptions and calculations weren't checked?

The launch of a new entrant into the direct life business two days ago has led to several interesting e-mails and telephone calls from readers and the FSB. But perhaps the most interesting issue arose when we attempted to solicit a quote via the Internet.

As most intermediaries operating in this sector realize underwriting is the issue. Lenerd Louw CEO of 1Lifedirect mentioned that they would be in a position to start a price war as the competitors would be undercut by as much as 30%. So we took up his challenge and got some interesting responses.

E-quote
While the business says that it can undercut competitors it did mention that it would be specifically targeting the middle to lower end of the market. So I requested an e-quote, based on my criteria, only changing the annual income option.

Little did I know that this was one of the main criteria in determining the premium and risk factor of the potential customer. One of the other criteria for their underwriting system and actuarial tables and assumptions was the type or level of qualification.

And guess what - FAnews uncovered a huge error. Suffice to say that if we didn't investigate the website and call for a variety of quotes based on income variation, the company would have been severely embarrassed and could have lost a large chunk of business.

Primary sector
The error was exactly in the market sector that the business claimed as one of their primary sectors - now thats what I call targeting the middle to lower end of the market.

We uncovered an error in their calculations, it seems. Whether it was an actuarial table error, or a programming error is not really the issue. But it did bring to mind the PFA ruling against an actuarial assumption made that was to the detriment of a disabled person, and on which the PFA ruled in favour of the complainant.

The comment from Louw was that they base their premiums on actuarial assumptions and essentially there is a socio-economic basis from which they work. He claims that all insurers work the same way.

Direct competitors
So I made a call to two of their direct competitors and went through a telephonic questionnaire. Obviously the first call centre operator wouldnt know which actuarial assumptions, tables and calculations were used to arrive at the quotation, but I wasn't asked for a level of qualification from one of their direct competitors.

Returning to the website. Having logged on and received by e-quote estimate all within a couple of minutes, I waiting anxiously for my call from the call centre operator.

Louw did say in the press conference that it was more likely that e-quote users would receive a call within 60 minutes - which is acceptable.

Still waiting...
What got up my nose was that 18 hours later I was still waiting for the friendly call centre operator to call me, and go through a more detailed questionnaire and then provide me with a revised quote.

When we approached Louw he said that they had been overwhelmed by the number of enquiries via the Internet. We didn't anticipate the response and undertake to get back to the e-quote users by the close of business on Wednesday.

In fact when we spoke to him he was on the call centre floor as it were.

It's all about service ask any intermediary. Clients don't want to hear that the product provider didn't get back to you in time. They want to know that you have the relationship to get the response and get back to them when you said you would.

Editor's thoughts:
* It's all about attention to details
* It's all about keeping promises and delivery, and lessons to be learnt from the intermediary market. If you don't call back you will loose the business.

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