The commission caps that apply to life insurance make a focus on efficiency especially critical to business model viability. For life insurance advice to be truly sustainable over the long term, efficiency can’t come at the expense of the customer experience.
Efficiency in a life insurance advice context comes more from the competence and confidence that allows you to:
Success in these areas manifests itself as more clients accepting your advice recommendations unchanged, as identified in the XY adviser study26 , which found that 72.4% of risk recommendations were implemented without change, and a further 22.5% were accepted with some modification, mainly for budgetary reasons.
“We don’t get asked to make many changes as we essentially build the recommendation in partnership with client. We have a really thorough discovery process and after going through this process together, the client has a better understanding of their own needs and is virtually deciding and agreeing on what is appropriate for them, so that’s what the recommendation becomes. There are no surprises from a cost perspective as that’s also discussed upfront and expectations are set.”
“We would have a very high percentage that take cover without any changes. And if they do have changes, it’s usually more to do with income protection, around either structure or waiting periods. We don’t really run into clients taking less than what we recommend because I’m asking so many of those questions at the front end of the process.”
The experts we interviewed for this paper were universal in their belief that best practice risk advice processes incorporated the following elements:
In simple terms, field underwriting is gathering enough information about the life insured to be able to determine their insurability before they actually apply for cover.
This generally means understanding, whether there are elements of their health, occupation, family history, or other circumstances which could impact the willingness of an insurer to offer cover on standard terms.
Successful field underwriting therefore relies on an understanding of the client’s circumstances and the underwriting approach of the insurer, bridged by a base level of understanding of medical terminology and medical conditions.
Having this understanding enables you to make a judgement of your client’s insurability before they even apply, which can help you narrow down your selection of suitable insurers (to those you believe are more likely to give you cover, on the best terms, perhaps because they specialise in particular occupations, or underwrite some health conditions – e.g., mental health or diabetes – more generously than others).
Knowing which health conditions are likely to attract a loading or exclusion is also important, as it will help you set client expectations from the outset. Understanding how loadings and exclusions work, and in the circumstances in which their removal can be requested, is also important.
Pre-assessments go hand in hand with field underwriting and involve getting an indicative sense of how a client is likely to be underwritten by an insurer. This can allow you to narrow down your choice of insurers as well as indicate those aspects of your client’s situation which may require more clarification and information gathering. Pre-assessments can therefore improve your efficiency as well as manage your client expectations.
Each life insurer tends to approach pre-assessments differently, in terms of their process, their responsiveness, and their accuracy. Pre-assessments do not represent ironclad offers of cover, nor definitive rejections. But they can help identify possible ‘speed bumps’ in the process of getting your client covered.
Essential to a smooth process is honesty and openness on the part of your client, and this means your pre-assessment information gathering needs to be rigorous. You don’t want the fact that your client drinks 10 beers every night to only come out when they actually apply for cover – there should be no surprises. In this sense the level of detail sought by insurers in their personal statements and – where applicable – their supplementary questionnaires, is a good benchmark.
All insurers generally issue an underwriting guide. Several insurers offer training courses on field underwriting techniques.
Put simply, the sheer volume and complexity of life insurance products makes the modest cost of a subscription to risk research software an investment that will pay immediate dividends. As well as the obvious efficiency savings in product comparisons across multiple criteria (including premium rates), there are often other useful resources to be found within them, including data on claims rates and statistics around the likelihood of suffering various health conditions.