Technology deployed by life insurers to assess an application may be resulting in lower levels of success as more people are screened at a deeper level during underwriting, according to an online life insurance advice provider.
LifeInsuranceDirect stated that the website had collected three years of data from 5000 applications and noted a 4% drop in application success over the past three years.
The group stated that in the period from July to December 2012, the success rate for people applying for life insurance was 80.04% but had dropped to 75.85% for the period of January to June 2015.
LifeInsuranceDirect, Chief Executive, Russell Cain said he believes the rapid uptake of electronic applications may have contributed to the decline.
“We are not underwriters, but what we have noticed is that, over time, life insurers have embraced the use of electronic applications and electronic applications make it quick and easy for insurers to detect certain risk factors and reject people on the basis of those risks,” Cain said.
“If, for example, the person applying for insurance has a certain pre-existing condition the computer can automatically reject the application. It’s just a simple matter of programming.”
In a whitepaper on insurability, Will you be accepted?: Three years of statistics, hosted on the group’s website Cain labels this type of work by insurers as “predictive underwriting”.
“Predictive underwriting is the use of data from consumers to reach a view about the applicant’s health status. This is an effective tool for screening applicants, reducing anti-selection, enhancing customer segmentation and improving underwriting accuracy and consistency.”
“However for consumers it can mean that it is more difficult to obtain cover than it was in the past. This evidence-based underwriting is essential, so the life insurance industry can defend differentiation as a fair reflection of risk, rather than discrimination.”
At the same time claims based off these electronic applications may also be having an impact according to Cain.
“We have observed that more people are being paid claims on insurance policies than in the past and we assume that’s been affecting the insurers’ bottom line,” Cain said.
“We therefore believe insurers and reinsurers have been tightening their guidelines around who they will and will not insure and technology makes this decision easier for them.”
“What all this means in plain English is that we believe insurers are looking more closely at your health, occupation and pastimes before they agree to insure you.”
It all gets back to a specialist Life risk adviser will always get the best outcome for all Australians, though our workload is substantially higher and we do not accept underwriting decisions until we have assessed with every Life Company, compared, then negotiated with underwriters and questioned medical decisions until a fairer solution is found.
Just yesterday we negotiated a 75% loading down to standard rates after doing our research and talking everything through with the Life Company, who to their credit, listened and agreed with our considered argument.
This is something the Government needs to understand, that in order to improve professional standards, you do not screw the true professionals to the point where they have to commoditise their service to survive, which in turn reduces the professional service they can provide.
In other words, being forced to join the merry band of auto / robo / product floggers who get paid the same commission for a fraction of the work performed, based on the quality of advice and time spent.
Thanks Jeremy. I have done this for client many times, but I’m not a ‘specialist life risk adviser’.
“What all this means in plain
English is that we believe insurers are looking more closely at your health,
occupation and pastimes before they agree to insure you.”
Insightful
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