CLASH OF THE TITANS: Teleunderwriting & Producers

Hank George, FALU, CLU, FLMI
October, 2007 • Teleunderwrtiting Essay 9

Before we get into this critical issue in the success of your teleunderwriting program, there is an announcement that needs to be made.

ABI Blesses Teleunderwriting!

The Association of British Insurers issued a 12 page report in August which conferred its imprimatur on teleunderwriting.

In it, the ABI recognized that teleunderwriting is in the best interests of British insurance applicants!

A brief report of this landmark development is posted at our web site.

Why is this important?

Because the ABI is a discerning organization that serves the interests of the public!

If they endorse teleunderwriting, then we have achieved an important milestone which we can use to underscore the appropriateness of teleunderwriting if challenged by regulators, legislators and others.

Now, let’s look at the issues regarding teleunderwriting and insurance salespersons…

…for whom there are more names than for medical records!

Let me clarify that by “salesperson” I mean “producers,” (the most common term of reference in the USA), brokers, intermediaries, advisors, agents…or whatever other (polite) term you prefer.

Some years ago, I was asked to speak in the Canadian Province of Alberta to a meeting of producers. One of my topics was teleunderwriting.

After I presented the teleunderwriting concept… they booed me! Thank God they didn’t have empty beer bottles in their hands!

Why did they react so negatively?

They were afraid – no, make that dead on certain – that teleunderwriting would encroach on their relationships with their clients, putting them at risk for losing the business (and, depending on the client, potentially a great deal more business) due to head office delays, insensitivities and nonspecific blundering.

Were their fears legitimate?

At face value, you bet they are!

If I were a producer, I’m certain I would have had the same apprehensions when hearing that head office personnel – or worse, strangers (outsourced providers) – were going to deal directly with the source of my livelihood, before the premium (and my commission) was paid!

What is the take-home message?

Teleunderwriting can be a disaster if we drop the ball in terms of delays in contacting applicants, how consciously (and conscientiously) we interact with them and whether or not the net impact of the process provides a clear benefit to those who sell our insurance (and, one might add, in so doing create the need for underwriters in the first place!).

A 4-Step Approach to Achieving an Enthusiastic Buy-In to Teleunderwriting by Your Sales Force

STEP 1: Palms Up From Day One

Talk to the chief underwriter in any company that has enjoyed tremendous success with teleunderwriting and one of the first things you’ll hear is how glad he/she is that they got key people from the sales and marketing side involved early on.

Not just at the cusp of rollout…that’s way too late!

We’re talking about involving the RIGHT people from the start…defined as the first planning meeting to discuss the design of your program.

Why?

Because those who participate and have input from day one are far more likely to embrace the outcome than those who feel some newfangled scheme, concocted in secrecy, has just been dropped upon them!

One of the most successful teleunderwriting- driven U.S. carriers took care to invite representatives of both the Marketing and Sales departments at head office in their preliminary planning.

They also did one more thing…and it turned out to be a stroke of genius!

They invited one of their most successful sales people – in this case, a charismatic and highly-regarded (by her peers) woman who resided in the same city as the insurer (thus assuring maximum hands-on participation) – to join the Teleunderwriting Task Force.

All three individuals gave constructive input – the net result of which made the teleunderwriting process better – and more importantly they became enthusiastic (and, as is their nature once energized, outspoken) advocates of the program.

They kept their colleagues apprised of new developments as the project went forward (indeed, the salesperson was invited to write a column in the company’s employee and producer publication on the subject).

At roll out, they stood side-by-side with the chief underwriter and the CEO when the teleunderwriting program was previewed for the leading agents at their annual sales conference.

Take-home message: get the key people on the distribution side involved early, listen to their ideas and critiques, make their participation visible to their peers and use their buy-in to win over skeptics when…and after…roll-out takes place.

STEP 2 : Ask “How Can Producers’ Most Likely Concerns Be Assuaged Through Teleunderwriting?”

“Agents invest time and use skill to bring the customers to the point of filling out the application…then time passes – often lots of it – often six weeks or more, before the policy is approved. What happens next? Some 25% to 30% of the policies are never issued because the customers have lost interest, or changed their minds or some other salesperson steps into the picture and sells them a product that is delivered quickly. By reducing the approval process by just a couple of weeks, we could cut the default figures in half!”

Ron Verzone
Best’s Review
October, 2003:100

Two major industry surveys of producers – published in 2004 and 2006 – revealed that the only issue that outranks application-to-issue turnaround time in the minds of producers is commissions.

Fact is, the two issues producers invariably have with underwriting are (1) it takes too long, and (2) it is too conservative.

Teleunderwriting doesn’t lead to a shift in basic underwriting philosophy, so the second concern is not going to be impacted directly (in truth, experience teaches that this perennial “hot button” is profoundly anecdotal, driven by their last case submitted and essentially incurable!).

That said, just knowing that one of the main goals of teleunderwriting is to significantly reduce dependence on medical records will resonate with sales people…

…because they associate underwriter review of medical records with a higher probability of cases being rated, postponed or declined.

Where application-to-issue time is concerned, teleunderwriting is (or at least should be, in due course) their salvation!

Make sure you place heavy emphasis on this signature payoff soon to come their way!

Not only does teleunderwriting speed things up, it should also assure the demise of their nemesis: the “incomplete” application…you know, where one question somehow fails to get answered and the case goes into suspended animation until this technicality is dealt with.

Time is money.

As my old friend Ron Verzone said, the longer it takes to issue a policy, the greater the risk that the client will lose interest. Moreover, the faster the policy is issued, the sooner the agent gets paid his commission. Don’t take these two considerations lightly…and make sure you tout them when you present your teleunderwriting program to them.

There is one more factor to consider here:

Producer liability.

If a producer, while taking down answers to the risk-related questions in the traditional application, fails to do his job properly, there can be ominous implications.

I recall a case I saw as a potential expert witness a few years ago. The applicant was the wife of one of the producer’s best clients. The producer knew the family well…so well, in fact, that he knew the wife – now applying for cover – had been “away” for a number of months earlier that year, tending to “a personal issue.”

The issue was depression and he knew it, despite the delicate terms of reference!

When it came time to answer the “mental and nervous” question on the application, he wilfully allowed it to be answered in a manner that was more than merely vague. Her answer did not reflect the true nature of the impairment.

And the producer took no steps to advise head office of what he knew to be true regarding her medical history.

The policy was issued straightaway.

The woman developed an aggressive, Rx- refractory lymphoma and died within the ensuing 18 months.

Upon review of the medical history, head office declined to pay the claim, because the true history of the electroshock-managed schizoaffective disorder was incompatible with insurability.

Guess who wound up on “the hot seat”?

…and almost lost his livelihood!

This is an ever-present risk that producers take when they intermediate the gathering of risk histories.

A risk that ends the day teleunderwriting begins.

STEP 3: Bang The Drums. Loudly!

When you’re ready to roll out teleunderwriting, make some noise!

No…make A LOT of noise!

One of my consulting clients held a special event for leading agents; another did a series of events continent-wide so that even more producers could be present.

There was plenty of (frankly, gaudy) fanfare. The CEO opened the show and then introduced – of all people – me.

I was the “industry expert” assuring them that what their company was about to embark upon was the road to glory, already paved (and debugged) by others.

In other words, if things went awry, they had an outsider set up as the “fall guy”!

Then, the CMO, the director of sales and a producer who’d been intimately involved in the design of teleunderwriting all paraded up for short (well, in most cases) hosannas.

After the break, the chief underwriter reviewed the BEFORE vs. AFTER impacts teleunderwriting was sure to have on matters “near and dear” to producers.

There was also a virtual tour of the teleunderwriting process and the outsourced provider for teleinterviews also got into the act with a colorful presentation, strategically designed to allay as much concern as was possible about “outsiders mucking things up.”

An updated Agents’ Guide to Underwriting was distributed. It not only upgraded descriptions of common impairments and their underwriting significance but also had an in-depth FAQ section on every conceivable issue producers might raise with teleunderwriting.

Sure, there were curmudgeons in the audience who sat snorting and grimacing, arms folded tightly across their chests…but they were far outnumbered by those who figured that if head office was investing this much in teleunderwriting, the least they should do is see if it worked…before griping!

The bigger the SPLASH, the greater the impact!

STEP 4: Deal Promptly and Efficiently with Every Issue Raised in the Wake of the Roll-Out

If you’ve worked more than 3 months with insurance sales people, you know the score.

They want their case-related concerns handled as promptly and as favorably as possible.

We can’t always deliver on the latter…but we can assign high post-roll out priority to prompt, decisive handling of producer questions and concerns.

If you get through the first few months, during which most of your more active producers have had a few cases go smoothly (right?!) through teleunderwriting, things will get better.

Because those first few cases are where attitudes toward teleunderwriting is shaped; then, in keeping with the nature of producers, cast in bronze.

If they have problems, they will blame teleunderwriting.

But if as many problems as humanly possible get addressed to their satisfaction early on, you can reinforce the message that teleunderwriting was the reason.

In time, even the most difficult producers will either be won over or find something new to grumble about.

If you set your benchmarks realistically, stay focused on those elements that matter most to producers and relentlessly send positive messages, then the demons you were certain you would encounter with “the distribution side” will soon evaporate…and a major benchmark for the success of teleunderwriting will have been achieved.

By the way, I had a second encounter with those Canadian producers – this time at a regional event in British Columbia – and things went differently…

…as I savored long applause following my comments on teleunderwriting and how it has forged an even greater bond between those who sell insurance and those whose hard work and unique skills make that insurance affordable and ultimately worth having (us).

DISCLAIMER
This essay was written for informational purposes only. Hank George and Hank George, Inc. do not recommend or endorse any specific business practice or procedure discussed herein. All business considerations concerning matters covered herein should undergo proper and sufficient scrutiny by appropriate management personnel of the companies involved prior to implementation on any basis. © 2009-10 Hank George, Inc.