I read Kevin Carr’s latest opinion piece on his recent underwriting experience with interest and immediately messaged him for two reasons.
First, to remind him he remains significantly older than me but also to point out that, much as I agreed with the premise of his writing, I found it a bit heavy on problem and light on solution.
That said, I had to concede I couldn’t really think where the next leap in underwriting evolution was likely to come from either.
People Kev and my age saying “it’s probably AI” must sound like middle-aged people back in the 1990s suggesting “the internet” as the panacea to all life’s ills. Without context or insight, it’s meaningless rhetoric.
My roughly two decades in the life market have coincided with the digitisation of underwriting. When I was selling policies around the turn of the century, the paper application form was my only option.
Even the biggest and most controversial disruptors, such as UnderwriteMe, haven’t sought to change the game so much as make the game slightly easier to play
We carried bundles of these chunky documents around with us (at least one for each insurer we might recommend) and, while each had additional pages designed to capture information on any diagnosed conditions, immediate acceptance rates were low and GP reports common due to the limitations of the data capture available.
The magic of the internet allowed insurers to turn these paper monstrosities into digital processes, which, as well as alleviating the strain on brokers’ arms, allowed underwriters to include unlimited reflexive questions in order to capture point of sale data on disclosures.
This innovation has led to an all-time high in terms of immediate decision making and a reduction in the need for GP reports but has necessitated ever more complex and expensive rules technology that underwriters must integrate, manage and update.
Arguably, change is just as hard now as it was in the pre-digital age, it’s just that IT change stacks have replaced printer ink costs as the major blocker.
If real-time data sharing becomes a viable reality, insurers will be able to see far more about a customer than is currently available through a traditional application
When thinking about real innovation in the last 20 years, it’s hard to pinpoint anything that hasn’t, in reality, been an improvement or iteration of an existing process. Even the biggest and most controversial disruptors, such as UnderwriteMe, haven’t sought to change the game so much as make the game slightly easier to play.
I hear often about true personalisation being the key to revolution in underwriting. This means accessing the consumer data that exists in the ether through our NHS records, banking history and other financial activities, socioeconomic markers, television viewing habits, grocery purchases and exercise and health uploads. You name it, somewhere a company or organisation has consumer data on it.
By somehow pooling all this information, insurers could give accurate premiums with little or no further questions – a truly personalised and efficient underwriting process, which would mean no forms, digital or otherwise, and certainly no nurses popping round to Kev’s house to measure his particulars.
There are, however, significant hurdles to be cleared in order to reach this utopia, including: customer willingness to allow their data to be shared beyond the purpose for which they intended it (I don’t mind Netflix knowing what I watched on Saturday but I might not want to share it with the world), data protection laws and differing jurisdictions, and the infrastructure needed to integrate the myriad systems and software used by each data owner.
In a market that has seen prices falling in real terms over recent years, perhaps this wouldn’t be a bad thing
There is also a wider, philosophical consideration. Currently insurers ask for a limited amount of information on which to make an underwriting decision. This means that, in the true spirit of pooled risk, they are taking the chance there is information about a customer to which they are not privy. Indeed, it may be information to which the customers themselves are oblivious.
If real-time data sharing becomes a viable reality, insurers will be able to see far more about a customer than is currently available through a traditional application. Can they remain “blind” to some aspects in order to continue to offer cover to as wide a cohort as possible?
Of course, underwriting could be less intrusive and quicker right now; it’s just that gathering less data would mean increased premiums commensurate with the higher risk taken by the insurer. In a market that has seen prices falling in real terms over recent years, perhaps this wouldn’t be a bad thing.
Phil Jeynes is director of corporate strategy at Reassured
