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There’s no denying that product features and price are important drivers for financial planners when choosing an insurance provider.
But without efficiency in getting cases on the books in the first place and without good claims management at the other end, it would be like owning a shiny new Porsche 911 without an engine.
Products and price vary as much as each client is different.
A reasonable basis of advice is not predetermined by product and price, it is established by determining what is unique about a client’s personal needs, goals and objectives, and then linking these to the most appropriate product and pricing strategy.
What does remain constant for planners and clients is the need for high quality underwriting, a consistent customer service experience and confidence in the claims process.
Underwriting service
When selecting an underwriter, two of the most important issues for financial planners to consider are a high quality service experience for clients and an efficient process that minimises administrative cost to serve.
A client’s perception of a planner’s professionalism is often a reflection of the life company they choose to deal with.
Underwriting is a client’s first experience with a life company. If it’s good they will undoubtedly have greater confidence with a planner and the life company. Unfortunately, if it’s a poor experience, clients may have longer-term reservations.
Partnering with an efficient underwriter is important to a financial planner’s business because they can significantly reduce administrative costs associated with writing insurance.
Unarguably, the relationship a financial planner has with an underwriter is one of the main reasons they deal with a particular life company.
But is it the be-all and end-all? Is there an opportunity for planners to step back and ask themselves, “What are the true drivers of success in the underwriting space?” and, “Am I getting the best possible result from the underwriter I use?”
While the underwriting principle of appropriate risk assessment has not changed, there have been significant advancements in the methods, technology, processes and philosophy behind underwriting.
So what are the most important areas that planners should consider when thinking about underwriting, in particular their cost to serve and enhancing their client’s experience?
Pre-population from quote to application
Data entry is time consuming and error prone. The easier it is to move from quote to application — for example, by pre-populating common data — the more time will be saved.
From application to automated underwriting
Automated underwriting technology is designed to provide the most efficient way of gathering a client’s personal information upfront and then makes a fast and accurate assessment.
Automated underwriting removes personal statement errors and (the inevitable) missed questions. It provides consistency of decisions, asks intuitive questions that are not part of the static paper personal statement, and, in a significant percentage of cases, makes a decision to accept immediately.
Outsourced personal statement collection
Should a planner be responsible for guiding their clients through the maze of the personal statement, and, in particular, the health questions? Not only can this be time consuming and potentially embarrassing, but more importantly, if a claim is denied because of non-disclosure, what ramifications does this hold for the planner?
If you can outsource this collection process to the life company underwriter, this disclosure sits between the client and the life company.
High reinsurance referral levels
Financial planners often say it’s hard enough dealing with one underwriter, let alone two.
If a client is applying for a sum insured that exceeds a life company’s referral limits for reinsurance, the application must be shown to their reinsurance underwriter for assessment.
This can lead to additional requirements and time delays. The higher a life company’s reinsurance referral levels, the less often this occurs.
High non-medical limits
An underwriter is required to obtain medical information, such as blood tests or a medical examination, if a client’s sum insured exceeds certain levels (based on their age). The higher these limits are, the less often a client will be required to go for mandatory medical tests. Booking clients into medical examinations can take weeks and can significantly delay the underwriting process.
High financial limits
Like non-medical limits, the need to provide financial evidence and justification, over certain sum insured levels, can be time consuming and complicated.
Higher financial limits reduce the time taken to underwrite and complete business.
Low Personal Medical Attendant Report (PMAR) rates
Of all the frustrations expressed by planners during the underwriting process, the problem of getting doctors to respond in a timely manner to medical reports can be the biggest concern.
Planners should ask and compare among their underwriters what percentage of business they request PMARs on, and what they are proactively doing to reduce their reliance on these reports.
Proactive underwriters prepared to speak directly with clients
Often the simplest solution to an underwriting problem lies with the underwriter speaking directly with a client.
By being able and willing to speak directly with a client, an underwriter is able to save a planner significant time chasing up simple questions and paperwork.
Turnaround times
How long does it take for business to be accepted? The longer a case takes to complete, the less likely it is to complete.
It’s important for financial planers to know what the average time to completion is; a quick turnaround means clients are on risk sooner, and has an obvious impact on a planner’s bottom line.
Good underwriting acceptance rates
For underwritten business, there is no guarantee of acceptance. This means that for some clients, planners could go through the time and expense of putting together an statement of advice and lodging the business, only to have the case declined.
Declined insurance cases not only cost a financial planner’s business money, but it could also cost them the client relationship.
The underwriting acceptance rate is the net outcome of all the procedures and practices an underwriting team puts into place to make it easier to do business with them.
Claims service
Ultimately, the reason a financial planner recommends insurance, and the reason a client pays their hard-earned money for it, is for the protection it provides.
Peace of mind that a genuine claim will be paid should the worst happen is a crucial factor in determining which life company to select.
One of the most common expressions in relation to claims is along the lines of, “We pay x per cent of all claims”. While this may sound comforting, what does it actually mean? After all, an insurance company must pay 100 per cent of all genuine claims that fall within the terms of the policy.
Don’t simply judge a life company by the claims they pay; judge them also by the claims they don’t pay.
What’s important is its claims philosophy, how procedural fairness is ensured across all claims and the internal dispute resolution process.
Also crucial is the level of claims resolved internally, positive and proactive claims initiatives to help claimants and initiatives to appropriately involve the financial planner during the claims process.
Yes, product features and price are key components that should be considered, but unless the net is cast further afield to issues of good management, it could be the planner, and their clients, who miss out.
Chris Kirby is head of technical strategies for personal wealth protection at AMP.
