Underwriting is all about gathering relevant information in the quickest time with the highest quality. Catherine Lyons looks at the impact of underwriting changes/developments in the past 10 years
4. Medical Evidence Limits
Over the years there has been increased pressure on companies to get business issued quickly and to reduce the levels of evidence requested. Companies have responded to this demand and the non-medical limits adopted by companies have increased significantly over the years.
However, there is a mismatch between the increase in the non-medical limits and the increase in sums assured. Using reinsurer SCOR’s internal data, in 2000 the average sum assured on a reducing term policy was in the region of £80,000 increasing to £130,000 in 2010 (an increase of 62.5%). The average increase in the non-medical limits over a similar period was around 80%.
Implications
SCOR Global Life’s recent benchmarking on underwriting outputs over a 10-year period shows companies are now rating a lot more applicants than 10 years ago (see table below). The decline rate has increased from 1% to 6% for mortality with a fairly similar picture for critical illness.
So, what does this imply? Are we underwriting better now? Do we have better quality lives on the books? Why has there been such a significant change? Here are some suggestions as to why this change has occurred.
Some of the statements in the table below will be true for some companies but not for others. So what do these changes mean for the customer? It is certainly a lot easier now to take out life assurance with the ease of systems, with less evidence being requested and more cases going on risk quicker. So, have these positive changes for the industry made things any better, or are we still having the same issues that we had 10 years ago?
The two major issues are, non-disclosure (old) and efficiency of underwriting systems (new).
• Non-disclosure – it was an issue 10 years ago and it still is – as an industry what are we doing to improve the situation and can we do more for the customer?
• Expert systems – how do we ensure that it does what it says on the tin and that this change is for the better?
Non-disclosure
This has been an ongoing issue for the industry for more than 10 years and declining claims due to non-disclosure have contributed to the poor public perception of the insurance industry.
With all the positive changes over the years, unfortunately non-disclosure still exists. Why? Application forms are longer now than they ever were so we should be getting better quality information – the ratings lead us to believe that we are, as we rate/decline significantly more.
