Clunky underwriting processes may be a thing of the past as new technology is applied. Paul Robertson speaks to Martin Werth about his UnderwriteMe system.
In theory, the technology will allow them to compete with the big boys, because UnderwriteMe creates the new underwriting rules engines for insurers, to their specifications, as existing underwriting rules engines are not web enabled. So each insurer will have a similar underwriting rules engine.
As Werth points out, one of the biggest costs for an insurer has been building front-end processes. If the buying experience moves from the insurer to the IFA, it becomes easier to plug in smaller insurers.
“I think it does help smaller insurers where they have strong niche positions. We are seeing a number of new insurers who could not see how to compete in the protection market,” Werth said. “We have had a lot of consolidation in individual protection. Adding a few new players into the marketplace should widen choice and give greater benefits to niche players.”
So when will this happen, in terms of the advisers getting their hands on the technology? The initial launch will be in the third quarter, with a limited number of distributors.
“Probably it will be nine or ten launch distributors we will go with. Like anything new, you have to work with a number of launch providers and launch distributors to make sure that when it rolls out, it does all the things that each of them want,” said Werth.
Post roll-out he expects significant demand from distributors and that other insurers will look to participate.
“We think it will take 12 to 18 months for distributors and insurers to really see the benefits of it,” he said.
Once the protection sector is up and running with UnderwriteMe, it does not take a great leap of faith to expect other financial products to be fit for the same treatment.
The firm already has its eye on annuities. “While there are ways to get better pricing than you have in protection, as the [annuities] market becomes more sophisticated, the level of underwriting itself will become more sophisticated as a system like this comes into its own.
“There is a lot of opportunity, not just in the UK, but also in other parts of the market in other parts of the world. Underwriting capability has moved on: it has become electronic; it has become automated; and a modern system really makes it much easier has applications throughout the world.”
Doing the right thing
However, at the moment, protection remains the only target. Werth sees the main thing holding back protection is a difficulty in making sales.
“The regulatory obligations for advisers in making that sale are high,” he said. “We have lots of research that shows that 68% of advisers are contacting more than one insurer for prices, so it is a very clunky process. If we cannot make it easy for distributors, they will not sell.”
“So we can actually see that, if you do the right things, you will have the right outcomes, and if we look at the past ten years of what we have been doing, clearly that has not been good enough because the market has shrunk by 50% in real terms.
“From Protection Review data, 44% of advisers have said their protection accounts were less than 10% of their business. So for nearly half of advisers, protection is a small part of their business. What would happen if we opened it up?”
If UnderwriteMe pans out, and it is certainly not the only option in the pipeline, advisers will be able to a decision on protection that is informed by final prices, product features and a genuine speed of completion. But, as Werth is keen to point out, it is being done without insurers losing their capability to underwrite.
“In fact, it is giving insurers more capability to underwrite, because they are getting richer information before they display the price,” he said.
“So they can identify whether it fits their customer segment they are targeting, their operational processes they want. Not only is it empowering the distributors, it is actually also giving more power to insurers.”
Werth is adamant that this generation of technology is game changing; a step change that will grow the market. He is backed up by Protection Review data, which states that 81% of advisers say it is the underwriting process that they most do not like about protection sales. One thing is certain: the excuses from advisers as to why they sell little protection are about to get a lot thinner.
