Risk industry leaders gathered at a Professional Planner/CommInsure roundtable to discuss what advisers and the insurance industry can do to make clients’ experiences with risk products better.
John Brogden – Chief executive officer, Investment and Financial Services Association (IFSA)
Michael Browne – Head of marketing, CommInsure
Simon Hoyle – Editor, Professional Planner
Gary O’Sullivan – Principal, Blueleaf Consulting
Warren Page – Chief underwriter, wealth protection products, AMP
Scott Robinson – Manager, underwriting and claims development, CommInsure
Jim Taggart – President, Association of Financial Advisers (AFA) and managing director, Taggart Group
Peter Tilocca – Chief underwriter, RGA Reinsurance
Andrew Vasko – Managing director, Intellisure
HOYLE: Are there still some [efficiency] issues that you come across when you’re dealing with life companies, or are they generally lifting their game?
O’SULLIVAN: How long have we got? There are certain companies who do extremely well in terms of their processes, their administration support, and their underwriting support. Some companies do that exceptionally well. There are a whole host of issues that are proving challenging, and for us we just need to identify what’s the point of least resistance to ensuring that we get a result for the client, both on an underwriting and, I suppose, taking into account the reinsurance requirements as well.
HOYLE: John, with Lifewise aiming to address underinsurance, if you’ve got members of IFSA who are inefficient and are, in one sense, a hurdle to the underinsurance problem, what can you do as an industry organisation to encourage them to lift their game a little bit?
BROGDEN: It’s not a role for IFSA to mandate efficiencies. IFSA’s role is how to work with mandates on standards. The two are often connected, of course. But as to the core issues, the amount of competition between our members and beyond, the interesting challenge for the life sector in the next couple of years is not, at this stage, a regulatory one, from my perspective. It’s more a business model approach. You know, people still think they should have life insurance; whether they have or not is another question. I think every Australian should have income protection; certainly anybody who’s earning more than the dole should have income protection. So we think the education at that level about the benefits of insurance is a very critical campaign.
BROWNE: As a committee member of Lifewise as well – it’s really just to make sure the general public can make an informed decision: Do I need to do something or not? Or at least I know where to get the information. And part of the research that the committee looked at was why people don’t do something about it. And one of the reasons – and it was one of the major reasons – was around, it’s too hard, or, I don’t know where to go. So that’s where you start to look at research and say, “Okay, if it’s too hard, how can we make it easier?”
The super funds are starting to get it right, by way of having automatic acceptance, but also default covers. Increasing those means, it’ll at least get a base of people covered. Whether it’s enough, we know it’s not, but the good news is, they’ve got something. From that, I think you can then educate people to say, ‘Well, you’re now risk-averse, because you have some and you appreciate its value; but have you really covered enough that you need?’ So then the calculators and things like that, that Lifewise have, is a way of then making sure that people understand the risk.
TILOCCA: From my view, in insurance, I have seen members of IFSA, life companies, really take up the challenge. I’m seeing that from a group perspective, greater levels of insurance. Group product, once upon a time, was quite basic. And now they’re seeing all these bells and whistles and add-ons, and different features and benefits…which I think is a positive thing. What we’re also noticing is we’re having quite a number of requests into the different distribution chains. In other words, the direct space. And so, there’s always a conflict about do you cannibalise your adviser force by opening up a different distribution channel? But nonetheless, a lot of life insurance companies out there are starting to respond to the challenge, I think, by looking at whether it be group insurance or whether it be direct insurance, and then of course, making it easy for the client.
ROBINSON: Talking about customer experience, I think the initial customer experience is probably quite good, because they probably just sign a document, or answer something on-line, and they get their policy document. Whether the customer experience at the claim time is as good [is questionable], because a lot of these direct contracts have pre-existing condition clauses that effectively mean that while someone may have had an opportunity to get covered – full cover through a retailer or wholesale space – when they go to claim, they really need that money, and get knocked back by the insurance company, who go, “Well, you already had this condition; sorry, we’re not going to pay the claim.” And I think that doesn’t put the insurance industry in a good light at all.
TAGGART: It’s about our role in making it really clear, and what…the consequences [are], if they don’t put that in place You see, there’s a bit of a contradiction. On one hand, we want it immediately, and yet, the process and the experience can take months. And so there’s a bit of a dichotomy between the experience and what you say to them, and what actually ends up happening. And I’m not saying that that’s wrong; I’m just saying that’s how it is.
BROGDEN: So through all your experience, would the drop-off rate on something like income protection and life, would that be higher? I don’t know what the phrase is, but between interest and execution, would income protection and life be one of the biggest drop-offs, compared to other inquiries you get from people, who think, it’s all too hard, you know, I’ll forget about it?
BROWNE: The actual number is probably 20 per cent; one in five applications in the industry would not actually proceed to a policy.
VASKO: There is research that’s been carried out for the last three, four years, on a regular basis, by WA Taylor & Associates. And what they do, they go and interview advisers and they ask, “What are the key priorities for you?” And effectively, what comes out of that research, three years in a row, if you look at top issues…it’s claims attitude, claims processing, claims processing speed, underwriting communications, access to underwriters, underwriting decisions, underwriting speed, timeliness in processing applications.
If you look, all of the issues they actually fall into two categories, two touch points, where you touch the customer. It’s underwriting application processing, and claims. And claims actually comes on top, because only going through the claim, your customer gets real experience. If you pay, pay on time: great experience. And if they don’t get money, that’s it. So while we are making short-form underwriting, so we can speed up the process, there is a downfall, and downfall in claim time [when] you may be asked to provide more information. So I suppose the challenge is to find a balanced solution, because there is no solution that will solve all the problems.
PAGE: I think it’s about focusing on what’s important. There’s been a huge shift in the market, in the reduction of medical requirements. We’ve actually focused on spending time and effort in a more targeted way. So rather than casting it very wide, just being very targeted in where you actually need to obtain the medical evidence. And even the medical evidence that we do obtain now, it is more customer-friendly – the blood tests and the nurse-type medical exams, as opposed to the specialist exams [that] are very time-consuming, very difficult to get, very, very expensive. So it was a win-win there; we’re spending less on medical expenses, we’re inconveniencing the financial planner and the client less – there’s so much less interaction now than there used to be. And we’re more creative in the way we actually obtain medical evidence as well. We’re using TeleDoctor.
That’s where historically it took three weeks to get a report from a doctor. That’s the bugbear that I’m sure we all share; it’s a third party getting a report back from a doctor; it’s not the highest priority for a GP, but it might be a very high priority for your customer and ourselves. So, we have these roadblocks, and we’re thinking how can we get around these roadblocks. So we’re looking for creative solutions as to how to tackle those roadblocks. To improve the turnaround time is one, that’s very key; but also to improve our completion rate, because like we said, we’re probably completing, as an industry, 80 per cent of applications.
TILOCCA: I know when I started underwriting, the landscape was quite different. And I pose the question to Jim and Gary, in terms of the last few years, as Warren said, we’ve increased non-medical limits, we’ve introduced paramedical services where the nurses come to you, so the inconvenience factor is not removed altogether, but it’s quite minimised now. And we’ve introduced the whole tele-underwriting process as well. We spend a lot of time and effort trying to remove the roadblocks in the industry.
ROBINSON: Ten years ago, Personal Medical Attendance Reports [PMARs] probably took three months to actually get back from a doctor – three weeks is quite an improvement.
PAGE: There’s been a lot of effort focused on what can we do to make doctors turn these reports around faster, and we previously had been experiencing a lot of the time, and I’m sure every company has its own experience, 21 days, 30 days – it’d be somewhere in that sort of quantum. But it’s three or four weeks where nothing real is happening. And we’re talking about electronic applications. When we have an electronic application, we know what the client’s applying for, we know their gender, we know their age, and we’ll ask specific questions for that client. You’re not asking a male about a pap smear, you’re not asking about that sort of thing. It’s more targeted in the questions, because the technology allows us to do that.
O’SULLIVAN: Warren, I’d say that there’s a certain degree, in relation to advisers, of reluctance to provide direct access to clients…because of mixed experience with various insurers. We’d have to be confident that the client experience is going to be a positive one. We’re trying to be as efficient as possible. I think there’s definitely, going forward, a greater role for technology in the underwriting process, but I think it’s something where perhaps there’s a bit more work to be done to assist adviser businesses in that.
PAGE: I understand that there’s an issue over control and managing client expectations. So we have, I think, a lot of companies will have multiple solutions. It’s not a one-size-fits-all. We’ll have a solution where it can be outsourced, or a solution where we can do it in the office on-line with the client.
BROWNE: Just on that decline issue, our decline rate’s 4 per cent of all applications. The “not proceeded with” [rate] is around, for most companies – not ours, but for the industry – typically 20 per cent, so one in five. And that’s really because of the inefficient process, and the fact that doctors and blood tests and things just never complete.
O’SULLIVAN: It’s also because probably the adviser potentially, who’s advising the client, is not quite up to speed in what they’re doing. So we have, as a business, picked up relationships from other financial planners or general insurance brokers who, shall we say, dabble in this area, because it’s taken them six or twelve months to get it through the system.
ROBINSON: If I was speaking to a group of financial planners – and obviously excluding you two – with that box in the personal statement that says, “Can the company contact your client?” I would tell pretty much everyone to do so. Because I’d be interested to know the experience of those people would actually have, where the underwriters have actually picked up the phone, spoken to the client, got additional questions, like questionnaires, questions over the phone, in comparison to people who tick ‘No’ all the time.
VASKO: One of the things that we have found out, and it’s a shortcoming of the industry…is actually there is disconnect between the insurance industry and doctors. It’s pretty much like picking up something and throwing it over the fence. And the reason for that is that there is no financial incentive right now for the doctor to complete those reports faster. And for them to complete a report for an insurer, it takes much longer because there is no automation on their side. So we end up in a situation where this process on the insurer side is close to perfect. It’s been polished so well that I don’t know how much further you can polish it. The insurer has very limited control over what’s happening on the doctor’s side.
So there are some changes in recent months, and one of the industry initiatives, we actually brought doctors some work, we got Royal College of GPs involved, and we got endorsement for the initiative we’re running. We found the way to bring all of the PMS – patient management system – software vendors together so data can actually electronically flow from insurers, to doctors, and back. And the whole idea is to turn this process into a commodity. And I think if there is a way to bridge this gap, I think it will dramatically improve this process. And it will actually put control back into the insurer’s hands. But when I say back into the insurer’s hands, it means the insurer will put it back into the adviser’s hands, so when a customer comes and talks to you, you actually know you’re in control.
O’SULLIVAN: One area which is again a bit of an uncontrollable, at this stage, is Medicare records. So you write for Medicare records, it takes up to ten weeks, we’ve seen in certain situations, and in terms of accessing that, and that holds [things] up. And that’s beyond our control.
BROGDEN: We roughly estimate most people have got two months’ worth of living cash in the bank.
HOYLE: What can advisers do to improve the client experience?
ROBINSON: Develop a relationship with your underwriter. That’s a very strong thing. When you’ve got a cohesive relationship with a person who is going to help you put something in place. When you have a good relationship between the two, you’re actually working together, to get to the end solution. Not against each other.
O’SULLIVAN: That’s absolutely key. We can do as much as we can to provide that information to the underwriter, but…they’ve got to be comfortable with the way we operate and the way we produce our advice documents and what we put in front of them; and we get to a stage where we can negotiate.
PAGE: I agree. We tried to promote the fact that you can ring an underwriter directly. And much of the underwriter’s day is taken up with the actual applications that have arrived, but also pre-assessments, which is basically “What do you think about this scenario?” whether it’s phone or it’s email. And hopefully, the underwriter can provide some guidance before the sale has been done, and if we set expectations then, we’re heading off on the right pathway.
TILOCCA: I talk to a lot of underwriters in the industry, and they definitely have told me that the financial planners that start to write risk because of their financial circumstances, do take a lot of work; they’re not understanding what they’re doing. They’re not understanding the pre-assessment process, if you like. The life insured is sitting there, and they’re clearly overweight – clearly overweight – but they’re not addressing the issue upfront and saying, “You may have to pay a little bit extra – you’ll get it, but you might have to pay a little bit extra”. That sort of thing. And then when the decision comes back from the underwriter, “We do have to impose a loading, due to [the insured being] overweight”, then there’s the phone call saying, “What do I do with this? Why?” and what have you. It’s definitely coming through.
ROBINSON: The underwriters have come out of the back office in the last 20-odd years, and now they have to sell their decisions to financial planners, because financial planners actually have to then turn around and sell it to their clients. When you’re talking to an educated financial planner who writes risk quite a bit, that sales point is a lot easier than if you’re having to explain to someone the repercussions of hypertension ten years down the track. You say, “Okay, we’re loading your contract 50 per cent”, as an example, “due to high blood pressure”. An uneducated financial planner who’s never written risk before will turn around and go, “What’s that got to do with anything? What are the ramifications?” So the underwriters actually have to spend more time on the phone to those planners. Like I said, there’s still that sales perspective. And I’d actually suggest that if an underwriter doesn’t sell a decision to a financial planner, they’re not doing their job properly.
VASKO: Is it a big cultural change for advisers to start using electronic applications? Because I think sometimes basically the issue is because people have got used to certain ways of doing business, and any change is an issue, regardless of which way it goes.
O’SULLIVAN: In a general sense, as it relates to the market, I think it is. I think there’s a certain comfort around what you’re used to doing. So any form of change, people automatically tend to have a reaction to it. They prefer to do what they’re used to doing and are comfortable with, as opposed to having to change that. So from our perspective, it’s a business decision, because it’s in the best interests of the business to be doing that.
TAGGART: The psychology of the sales process is very different with electronic application to a paper-based [one]. The paper-based, in my humble opinion, is one in which you can allow anecdote, you can talk, and feel free and write freely. Whereas, for many people, particularly males, their typing skills are very poor. They really are. And that’s very cost-inefficient for someone, like me, that can do five or ten words a minute. And I don’t have that time to do that, yet I can write copious notes. Two other points. One is the loadings. One thing that disappoints me is that there’s variations in the size of loadings between different companies, and that’s very frustrating.
I can put a proposal in with some companies and get 100 per cent loading; and go to someone else and get a 50; and then go back to the original company and they’ll give me the 50. And I find that frustrating at times. And I think, advisers and perhaps junior underwriters really need more work on financial accounting, financial underwriting, if I can just say that. I get very frustrated with that, maybe because I’ve done accounting. So there’s just a couple of comments, that’s all. I think it’s improved dramatically. I struggle a little bit with my experiences. We have about a 30 per cent knock-back, and I find that really hard in terms of writing business, because you’ve got to replace that potential income.
BROWNE: It’s interesting to think if we do move to fee for service, because effectively you’re then charging literally a third of these people for something.
TAGGART: Well, can I just say – this is the first time you’ll hear this from me, and not as President of AFA – and John, you’d be interested in this: I want to thank you for fee for service, because we’ve done some modelling, and our income is going to increase substantially. I’m just simply saying [charging] fee for service, our income will increase, our total revenue to the practice will increase substantially.
HOYLE: I’d just like it on the record, Jim, that it wasn’t me who raised the fee for service issue.
BROGDEN: It’s fascinating to me that all of the discussion we’ve had is about the back office, if you like, the process. It’s not the first interaction, it’s the [subsequent] interactions…over which the consumer has very little control. So that’s interesting, that what we need to fix is something they don’t control, and therefore they could feel quite powerless in that process.
HOYLE: Good advisers do an outstanding job, the underwriters are working hard. When it comes to a claim, the system seems to work pretty well. It seems to be buggers in the middle, when you need medical information, that bring the whole thing to a shuddering halt. Is it a big problem? Or am I overstating it?
ROBINSON: No, no, it is quite big. And I think even the quality of the information you sometimes get. Not meaning to concentrate on mental health, but as underwriters, how often do you see a doctor’s report come back, and ten years ago you see “stress” highlighted at a consultation. And you go, Okay, well, client suffered stress, you don’t have any other details about it, you don’t know whether it was a concern that would actually cause him to go off work in the future, or whether it’s someone just walked in going, “Got a lot on at work, I’m stressed”. So as an insurance industry, we have to try and find a good balance, whether it be to put a mental health exclusion on, and then you’ve got a client turning round to the planner going, “I’ve never suffered a mental health condition in my entire life.” So there is, I think, a quality of information issue that needs to also be addressed.
BROWNE: I think what’s really key is this whole issue around field underwriting. That’s making the adviser understand the implications of submitting a case and being able to pre-position with the client upfront, so that the expectations are managed from day one. And not enough advisers really, I think, understand that. It’s a bit like, well, here it is and let’s see how this goes, sort of thing.
ROBINSON: Well, that’s what I’m really saying. I’m saying if we are going to be professional, and we’re looking at the experience from beginning to end, I think there could be a really good opportunity to take the complexity of the proposal, whether it’s electronic or paper-based, and say, “Well, this section’s about habits”. For example, my understanding – I could be wrong – if someone smokes more than 25 or 30 smokes a day – I think it’s 30 smokes – there is going to be a loading.
PAGE: I’ve never done it obviously, but that secondary sale that you have to do on an unexpected loading, or an exclusion, must be one of the most difficult appointments you’d have.
O’SULLIVAN: The good news is that you can get the cover.
TAGGART: But the interesting thing is for the experienced [adviser], nine times out of ten, you know you’re going to get a loading. If you’ve gone through that documentation and you tell me that you’re on [medication] and I’m going, alarm bells, alarm bells, alarm bells: “Tell me about that. Did that happen? Really, that’s interesting. Tell me about your mum and dad. Oh, really? Charlie Brown, we’ve got a problem.” So it’s positioned.
TILOCCA: How does an adviser know what potentially may be a problem? I mean, sure, we collect data from all our clients. And to help in that process potentially, we know that the main medical issues today are mental illness, obesity and diabetes. They’re the top three that, as a risk adviser, if you don’t see that on a daily basis from one of your clients, there’s something wrong, because for all our clients – and we’ve got quite a number of them – we collect all the data, and they are the top issues that we see consistently coming into the office. And based on that information, then you can track back and potentially look at your statement of advice, and look at those key things at least.
O’SULLIVAN: Yeah. But also in terms of the education process, Pete, going forward, you can get the various product providers and the dealerships to take on board the importance of educating financial planners about these, and prioritising. And in the main, these are the areas we see it, so you can educate down along the line.
VASKO: And it feels like, if there is a way to make everybody aware of what others are doing, it’ll just work. Because there is a bit of grey area, so they’re doing something, we’re not quite sure what, we’ll just do our bit, we will do it perfectly, and then if it doesn’t work, there is always a little bit of blame. And I think if there is a way to start sharing information and start explaining where the pitfalls are, people will be far more receptive. Because everybody’s talking about the fact that adviser and underwriter need to have a relationship. Well, that’s one of the ways to make a relationship great. Share information. Actually, sharing problems is one of the ways to solve those problems, and in some cases, those problems are non-events, only because people do something wrong.
ROBINSON: One of the powerful elements of the underwriter is the collection of data. So historically, the life insurance industry has been abysmal at collecting good underwriting data. We collect lots of data, [but] haven’t done anything with it, and definitely haven’t looked at the data [from the] front end, versus the claims – you know, data that you collect, trying to match up the two, and saying, “Forty year old male dentist living in Katoomba is more of a risk than a 40 year old male dentist living in North Sydney”, for argument’s sake. And so the age of electronic underwriting, as we use more electronic underwriting, and collect more data, we can grab that data and then circle back and feed that back into the system, to make better decisions, to make more consistent decision. And I think that, in a few years’ time when we’re talking about it, [we’ll say] that improved the customer experience.
VASKO: Also turning it to electronic actually creates the balance between speed and quality as well, because it reuses existent information, and does it faster. In New Zealand, because they’re small as a country, they’ve actually addressed the problem of medical process, and they go with major insurers on board, and they’ve implemented this process. The feedback that we were getting from New Zealand is really amazing. The fastest in terms of medical request process was actually at AMP New Zealand, and I think it was 51 or 55 minutes from the moment somebody requested it, and it made the whole circle, just because there is a way to do it electronically. Integrated electronically with doctor, and get it back in a structured way, so that underwriter can actually understand what comes back. So improvements like that will actually improve all process dramatically in the long run.
TAGGART: It’s not filling in an application; it’s not the engagement process or claims; it’s a relationship based on a total experience. And that needs to be, I think – I don’t know if these are the right words – but better done in the whole adviser market. I really believe that. There’s too much preoccupation with all these sub-parts, and assuming that they all fit together. We need to position that better as advisers.”