Time to put trust back into underwriting

24 August 2018

When people purchase life insurance cover, they are doing so on the basis that a life insurer will be there for them and their family when they need it most – at claim time. 

When customers buy life insurance, trust is arguably the most important component of the purchasing decision. They need to know insurers will honour the contract with them but also help them return, not just to work, but to the life they lead outside of work.

In recent years, the media and political spotlight that has fallen on the life insurance industry has seen community trust falter. In the face of diminishing public trust, the industry needed to change. This change needed to happen on cultural level within companies, focusing on customers rather than process. 

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Underwriting is intrinsically linked to making a claim. Good underwriting means that insurers can give an accurate assessment of a customer’s risk status, price the insurance correctly for that risk, and ensure that the policy they have purchased is there for them if they need to make a claim.

For too long, however, underwriting has been seen as a barrier to getting people cover. With little investment by our industry, the traditional approach has been too complex, lengthy and invasive for both customers and advisers. One of the reasons for this is that it is not based on trust. Customers answer questions and then life insurers spend time and effort to check what they have said is correct.

What would happen if we put this trust challenge to the side and instead built trust into the underwriting process?

Life insurers are implementing new underwriting innovations in the Australian market to overcome this trust bias. 

An example of this is MLC Life Insurance’s new online application form and underwriting platform. From the outset we wanted to ask only the questions that were relevant, easy to understand and therefore easy to answer for our customers. Tailored to the individual applying for cover, our aim is to ensure customers have trust that the information shared with us will be captured and assessed properly.

Mental health is another good example of this, with most insurers saying that mental health claims are increasing. With one in five Australians experiencing a mental health condition each year, this is an important area for the industry to get right. 

At MLC Life Insurance 15 per cent of our current disclosures in underwriting relate to mental health. We looked at the questions on our personal statement and realised we needed to make them less onerous and more relatable.

We took the step to not just underwrite on a diagnosis alone but to allow our customers to best describe their condition and the impact it has had on their ability to work. We developed a number of statements that enabled customers to provide a more personalised view of their story and how they managed their condition.

These changes will make it simpler and quicker for people with mental health conditions to apply for cover and the insights from this data will be used to inform product development and improvements.

The initial results from these innovations have been strong. Straight-through acceptance rates, where customers get approved cover automatically without further manual underwriting, have increased by 300 per cent since April. In addition, there has been a 20 per cent reduction in the number of follow-up calls to customers seeking further underwriting information.

By providing better and more accurate underwriting for customers, I believe we can give them greater confidence – and ultimately trust – that life insurers will be there for them at claims stage when they need help the most.

I think more work needs to be done. 

We need to look at underwriting as a continuous process of learning and adaption, using knowledge and insights from customers to evolve the underwriting process that goes beyond the setup of the policy. By understanding customers, asking the right questions at the right time, life insurers can price insurance appropriately, making it available for those who need it most.

Debbie Kennedy is chief underwriter at MLC Life Insurance

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