Better, faster and cheaper
Competition and consumer demands are the driving forces moving companies to reconsider the ever more complicated rating structures and application forms, and to return to simplicity.
In the last edition of FAnews, we took a look at the trend in which the quoting process has become far more complicated as sophisticated tools are used to drill down into minute risk detail to produce highly individualised quotes. The backlash to this is a return to a more simplified rating model. This issue was highlighted at this year's LOMA International Underwriting Congress in Shanghai entitled Evolving Risk Management: Yin and Yang, as Bil Monday reported from Shanghai.
Effectiveness questioned
One of the lectures, entitled Cost Benefit Analysis of Application, questioned the effectiveness of the questions asked at the application stage, as well as their effectiveness as a screening tool. It considered the application questions as a balancing act between simplified underwriting, cost pressures and risk management. The message of the lecture was that it is an important objective to streamline the application questions, based on the type of product sold, and to continuously enhance the application questionnaires, decreasing redundancy and increasing effectiveness.
Customer friendly
Another presentation at the Congress focussed on how the insurance industry should learn from the consumer industry to manage insurance products. The presenter felt that the insurance industry is behind the consumer industry in operation efficiency and customer friendliness. The industry needs to simplify, streamline and standardise, also in terms of applications and quoting. The insurance industry was likened to and old Hi Fi system with an amplifier, a turntable, tape deck and speakers, trying to operate in the age of the iPOD.
Technology
Application forms with several pages of questions are becoming a relic of history as more and more companies move to electronic solutions, including tele-underwriting. At the Congress, case studies were presented by companies using tele-underwriting.
The bottom line was that turn around times have improved dramatically and customers are asked relevant questions by rules-based drill-down systems. There is more confidentiality and less repetitive rote work for underwriters. Administrative costs are reduced.
Straight through
"Straight-through-processing" or STP is a current buzz phrase pertaining to the process where the workflow from application to issue remain in a consistent electronic format combining tele-underwriting, rules-based systems and real time communication with all players.
Simplified issue products that adopt a simplified underwriting process or guaranteed issue are also becoming more popular. They may also adopt tele-underwriting or novel forms of underwriting such as pharmaceutical databases (i.e assessing your medical risk by analysing what medication you have used over a period of time).
Accessing middle income markets
Simplified issue products are particularly being used as a way to enter the middle income and senior market and by banks and direct marketers. The popularity of such products is gaining impetus. Ninety four percent of companies adopting simplified issue products use an automated underwriting system to various degrees.
