Is the current online model still fit for purpose?

Expert underwriting

After a century of the old manual sales advice process where the customer always spoke with an advisor of some type before buying life insurance, the evolutionary path of online technology moving into the 21st century moved the buying experience on. But the speed of evolution in this field has picked up, so just 20 years on are the new business models that were put in place at the start of the century still suitable today?

Traditionally the customer would meet with an advisor, discuss the customer’s needs and then the advisor would provide a base premium quotation. An application would be made to the insurer chosen and then the health declaration would be completed, either at the same time or shortly afterwards to accompany the application.

Yet during the meeting and after providing the base quote the advisor would have to explain to the customer that this quoted premium would only be applicable if the customer is accepted on “standard terms” after the underwriters have assessed the health declaration. This premium therefore being an “indicative” premium since it may or may not be the final price that the customer must pay.

The transition to technology

The initial transition was a matter of using technology within the process to improve this same model.

Quotation portals were introduced that helped advisors obtain the base premium quotations instantly for many if not all insurers at the same time. But the premiums were still only indicative until the health declaration had been assessed. And even today not all countries use quotation portals.

The collection and assessment of the health declaration was also addressed. Many customers are acceptable on standard terms, so by placing rules into an expert underwriting engine it is possible to confirm the premium to a customer immediately after the health declaration is completed. So the customer does not have to wait in limbo whilst the health declaration has gone off to the insurance underwriters to be told what the actual premium is. But not all insurers go this far and just use electronic forms to collect the health declaration information online or a basic health declaration. So the price even at this stage may still only be indicative.

Trying to move to the next phase is still not totally determined. You can ask more health declaration questions up front so that the quotation portal can give a more informative premium but in most cases still indicative or, after having obtained a base premium, a standardised health declaration can be completed before or during the application process to give a more definitive underwriting assessment from a number of insurers at the same time. But this only works if all insurers are adopting this process. 

Taking a tip from the past

When insurance began in the coffee shops of London and with the early days of Lloyds the model had a different look to it. The facts about the insurance risk would be taken around to the underwriters and they would assess it immediately, each one stating what they would charge to take the insurance or a portion of it. The person wanting the insurance would then at that stage decide which underwriter to place the business with.

Admittedly, today insurance underwriting is more exact with the wealth of information available and the number of customers taking insurance, spreading the risk amongst the many. But with the progression of the Internet and the new digitalised approach of customers to instant online purchases, we can use the advanced technology that is available today to remove the concept of indicative premium quotes or underwriting decisions for many customers.

The customer is able to complete the health declaration online in advance of any meeting with the advisor. And by using the expert underwriting engine to full effect, drill down and gather as much relevant information as necessary to enable the rules to assess as many customers instantly. Then when the customer and advisor have determined what products and amounts to go for, in the majority of cases the premium quoted will be the actual premium the customer will pay, and not just an indicative premium. This premium being a fully underwritten premium.