Nine months on from Consumer Duty coming into effect, we take a look at how tailored underwriting can play a part in helping advisers to meet the new rules.
Consumer Duty regulation has been described as the biggest regulatory shake-up to the UK's financial services industry in 20 years, requiring advisers to provide their clients with the best possible outcomes for the products they are advising on.
When it comes to protection products in particular, it's even more important to recognise your clients have different circumstances and product needs. How they live their life, existing health conditions, and what they do for a living, can all have an impact on them not only getting the right cover, but cover at a price that suits them. Dependent on customer disclosures, we offer cover to 72%* of cases without the need for further underwriting.
Outcomes can vary significantly
With many providers, over a fifth of clients with asthma will not receive standard rates**. Whilst for those with a history of mental health issues, this could be as high as a quarter of them not receiving standard rates.
This is where accurate and inclusive underwriting comes in.
Some quote portals have experimented with partial underwriting assessments during the information gathering process. In fact, the Protection Platform from UnderwriteMe has taken this further by developing a common application form that allows submission of a client's full health details to get a range of fully underwritten outcomes, allowing options to be compared. Whilst there will still be cases that will need to be referred for manual underwriting, the functionality shows the variance that can occur when different insurers assess the same risk. This is a useful tool for advisers, but it needs to be acknowledged that the system doesn't provide a whole of market comparison.
Insurance providers are also bringing in technology improvements which will ultimately help to streamline the underwriting process: easy-to-use online application forms and tools which give an indication of the underwriting outcome earlier in the advice process. Also, electronic GPRs have really helped to speed up the process of gaining a GP report. Using this method, the insurer can contact the GP directly through an online system, meaning a more secure transfer of sensitive client information. Uptake levels have previously been low, but it is hoped that more GP surgeries will adopt this system in the future.
Other improvements such as providing advisers with direct access to an underwriter, and improvements to application form questions so clients can tell their medical story in detail, are also helping. But insurers should continue to seek new innovative ways to make the process easier.
*Scottish Widows data, 2024
‘** Source: Protection Platform 2023 supplied the average market result in terms of % of cases that get ordinary rates. Scottish Widows standard rate return for asthma is 94.01% and mental illness is 82.42%.
