The Many Faces of Teleunderwriting

Hank George, FALU, CLU, FLMI
April, 2007 • Teleunderwriting Essay 3

 

I’ve worked with, heard about and/or seen dozens of teleunderwriting operations in North America and the United Kingdom.

And the one thing that stands out about them is that NO TWO ARE ALIKE.

This, if you will, is the beauty of teleunderwriting.

It is an approach to gathering risk information that is 100% customizeable to the specific needs and circumstances of each company. No master plan must be religiously adhered to. This is not a “one size fits all” undertaking! Therefore, in this essay we will look at key factors that influence how any given insurer configures teleunderwriting to fit its unique needs and circumstances.

In this underwriter’s view, two main issues that must be addressed when launching an effort to consider and – if wisdom and the desire to remain competitive prevail – embrace teleunderwriting:

1. Will teleinterviewing be “dropped” into your existing new business process, or, will your entire process be scrutinized, and, where necessary, re-engineered as part of this undertaking?
2. Will you choose to be redundant in the gathering of risk information from proposed insureds, or, will you have the vision (and the courage, in many cases) to recognize the perils of redundancy, and then eliminate this pathology from your process?

 

“Big T” Or “Little T”: The First Critical Question

In our book on teleunderwriting, Susie Cour- Palais and Peter Maynard (SelectX, UK), and I chose to dub the two approaches mentioned in bullet point #1 as “BIG T” and “LITTLE T.”

I’m not sure in retrospect if this is still the terminology of choice, but there is no question that it grabbed and held the attention of most readers OUTSIDE North America. When I speak with chief underwriters from the UK, these two terms keep coming up! The concept works like this:

“Little T” means you set up a teleinterviewing program and then insert it surgically somewhere in your existing new business workflow process.

Obviously it is positioned after the application – or, in a non-redundant environment, the “request to secure coverage” document – is received and before the review of underwriting requirements takes place. This is the only way to insert teleinterviewing, of course, because the sum of information that can be obtained in those first few days becomes the basis on which you make the most critical decision in teleunderwriting: the risk triage.

Just a couple of comments on the triage.

Triage is simply the underwriter asking herself/ himself: based on what I now have, can I make a decision without further information?

Can I, RIGHT NOW, with whatever information, including the teleinterview, I have in hand:

1. Approve the case as applied for?
2. Offer coverage “other than as applied for”?
3. Postpone on some basis?
4. Decline coverage?

Remember: the goal in teleunderwriting is to say YES as many times as possible, because each time you make a decision during triage, you realize the 2 main corporate goals inherent in teleunderwriting: FASTER approval and LOWER business acquisition costs.

Back to “Little T.” The (short term, anyway) advantage of parachuting a teleunderwriting approach into an existing new business paradigm is, obviously, faster implementation and lower cost. Once you have the questionnaires ready and the mechanism in place to get the interviews completed, you are up and running…more or less. The underwriter is seeing completed teleinterviews and if he/ she is properly educated as regards using such interviews, you are now doing “Little T” teleunderwriting.

The potential disadvantage to this approach is that while you have made teleunderwriting work, there may be problems in getting the process to mesh and you may be missing huge efficiencies by not examining that process end to end.

Ideally, insurers want to create a flow-through new business process – from the time coverage is applied for until it is issued, delivered and (hopefully) placed in force – such that maximum benefit is derived from going over to teleunderwriting.

I am no I.T. guy but it is clear even to me that if you don’t have the best possible synergies through the necessary steps, you may be creating as many problems as you are solving…and no matter whether those problems are few or legion, you could be far from optimizing your operation.

Some experts in teleunderwriting, like my longtime friend and fellow professional underwriter Ernie Testa, would argue that what we call “Little T” is more bandage than solution.

Ernie defines teleunderwriting as a “better way of doing new business” which happens to have, as its core information-gathering component, a telephone interview. It is not merely a “plug and play” process.

In an interview article I organized for LOMA’s Resource magazine [March, 2003], Ernie cautioned against “layering of incremental changes on top of an already fragmented process.”

All things considered, I have to agree with him.

I have seen some truly suboptimal (in a few cases…flat out BOTCHED) teleunderwriting initiatives that were in a fractured state due to a something less than “seamless” flow of new business.

If you superimpose teleinterviewing on your existing paradigm, will its impact be harmonious or will it cause new headaches?

The good money says you should consider starting on day one by fashioning a work flow process diagram that encompasses every step from application submission to issue and delivery of the policy.

Indeed, it may make sense to also examine and rethink processes that precede application submission as well as looking beyond delivery toward possibly integrating policyowner service elements (remember: POS is where reinstatement cases needing assessment come from, among other things) into your teleunderwriting master plan.

This is why most companies that realize maximum benefit get things started with a multidisciplinary task force; one which includes – in addition to underwriting/new business, I.T. and other staff – folks from product design, distribution, POS, claims and compliance.

In the end, the more input the better. The last thing you need is to be forced to backtrack halfway down the road because you neglected to involve people from these impacted areas.

Sure, it takes longer to hear out and deal with all the “vested” interests…but isn’t it better to tackle them head on than to have problems emerge later on that could slow down, even unravel, your hard work?

For more on customizing a new business process in a teleunderwriting environment, get and read a copy of the article by Tammy J. McInturff. It is all about the great things going on in this regard at Western and Southern Life, a leader in new business efficiency. This article was published in the March, 2006 issue of LOMA Resource.

 

Redundancy Is A “Four Letter Word”

Redundancy irritates the customer.

And who really matters more than the insurance buyer?

Remember, you’re not the only company he can get insurance from (unless you do business solely in North Korea)!

If redundancy irritates the customer, count on it irritating the producer (agent, intermediary, IFA, broker, “the guy in the polyester suit”…or whatever you call those who sell your insurance).

What is more “fun” than dealing with a riled up agent?

Redundancy results in more work for the underwriter. Yes, occasionally it will unmask an episode of antiselection, because the applicant forgot exactly what he said after lying the first time around.

However, for every time this is the serendipitous outcome, you will be needlessly slowing turnaround time while incurring major indirect costs in the business acquisition process, 100 times over!

What are we getting at here?

Avoiding taking the risk history more than one time.

Some carriers I know that do teleinterviews nevertheless continue right on having the sales person ask the risk-related questions on the application.

Why?

The “non-medical” is an artifact from the past. It is dead…being replaced by the teleinterview.

On your parameds, do a “one-sided paramedical,” wherein the technician completes the physical measurements, gathers the fluids and so on…but do not have her take the medical history any longer…because you now elicit that history via teleinterview instead.

What is the possible logic behind asking the proposed insured to answer the same questions twice?

Put yourself in that person’s position.

How would you like to have your insurance agent ask you 35 health and other risk-focused questions…then get a call from a “pleasant female voice” who proceeds to ask the identical questions you’d already answered with the agent?

All redundancy should be exorcised from your teleinterview-driven new business process, to the greatest extent possible, before that process is implemented!

Ask once.

Do it with your teleinterview.

Limit the “application” to collecting ONLY those facts needed to launch the underwriting process: name and address, plan and amount of cover, riders, beneficiary designations…and whatever additional documents or information which MUST be agent-gathered, due to common sense or regulatory mandate.

The agent is still taking “an application”…but one appropriately devoid of risk-related questioning… because this function is now in the hands of the teleinterviewer.

Instruct your paramedical technicians and/or M.D, examiners to confine their efforts to examining and collecting fluids. You’ll get what you really need from them and you should now pay less for their services than was the case when they also took a medical history.

Avoid provoking the customer with redundancy… or, get ready to deal with this:

“Why do I have to answer these questions again? Your agent already asked me all this stuff!”

 

Distribution Shapes Teleunderwriting

“…insurer carriers are being held back by their inability to get their life insurance products to market quickly and to underwrite new business efficiently.”

Cindy Saccocia
The Tower Group

(as shared by K Mcgrath of Insureintell.net)

 

How you distribute your products is a critical consideration when you’re taking the plunge into teleunderwriting, because you must customize your teleunderwriting and related processes to fit each mode of distribution.

The number of delivery modes deployed for the diverse products encompassed under “life and health insurance” continues to grow. I’m quite sure I can’t name them all.

Some of them gain prominence, then fade. Others never get the traction people expected them to. And still others soar like eagles, sooner or later.

But all that matters for our purposes is that you configure your teleunderwriting process to be consistent with the goals (and the limiting factors) in each mode.

Take for example Internet-mediated sales.

Should you use a teleinterview here or rely on taking the risk history on-line?

Think about the ramifications of taking the risk history on a fully-underwritten case…

Common sense says that Internet buyers are not the world’s most patient people. I can’t tell you how many times I have lost interest in buying something from a website when the process was arduously slow and involved too many steps.

I think they call this “Internet buyer fatigue” or something akin to that.

How often are you going to get someone applying “ on-line” to answer 40 or so baseline questions and then, another 5 to 15 questions (drilldown) every time one of the 40 is answered YES?

I would think that, via the Internet, the incidence of completed applications of this kind would be strictly inverse to the length of the process: fewer questions = more completed sales processes…but also vice versa.

Therefore, to minimize losing the buyer’s interest, you must cut back on the number of questions as well as the length of your drilldowns. When you do these things, you increase the odds of unfavorable mortality and morbidity.

My concern here is that the sheer amount of relevant disclosure on Internet-mediated teleinterview alternatives will pale by comparison with what is obtained during a human-to-human teleinterview encounter.

Moreover, telephone teleinterviews are not conducive to long pauses, wherein the applicant asks him: “am I shooting myself in a foot by answering and telling the whole story? Therefore, Internet-mediated risk information gathering may put you at much greater risk for antiselection.

When all is said and done, I have profound concern for the quality of risk information that can be gathered using fatigue-prone, nondisclosure- facilitating non-human “interviews” based on answering questions about risk issues on-line.

Hopefully I have been proven wrong; if so, I’d love to see the data!

Bancassurance is one distribution mode that is absolutely perfect for teleinterviewing! You can arrange for a “hot transfer” from the bank office to a team of waiting teleinterviewers.

I walk in to my bank, fill out a short form life or critical illness insurance “application variant,” I push a button and on comes a teleinterviewer whose charming voice gathers my risk history.

Could I get actual application approval at that time? Yes, in theory, if there is an underwriter on the other end or if you use a rapid processing system in the loop that can approve “clean” cases.

Otherwise, there will be a wee bit of lag time, which can be greatly minimized if those who design the process shun slow requirements and stick with what can be gathered electronically.

Why not do oral fluid, with the specimens collected by the bank people on site? Underwriting would be “delayed” a couple of days, but so are many other bank-mediated functions. In return, you would be able to enhance your mortality or morbidity database for making the best offer.

And we are talking about just a couple of days…not 26 days, like a fully-underwritten case “needing” a medical report. More than a couple of days would be fatal in bancassurance…so all requirements that take more than a couple of days are contraindicated in this distribution mode.

Soon, we may have skin sterol (cholesterol), another innovation that is as customer-friendly, if not more so, than oral fluid. It, too, could be configured for use in a bank or, for that matter, a worksite distribution environment.

And then (in America at least), you have the protective value of MIB, Rx profiles, motor vehicle records and possibly other e-mediated database information, all of which should be intrinsic to all distribution modes and especially Internet, bank and work-site.

This is a tremendous package of protective information. Don’t let anyone tell you it isn’t!

 

Teleunderwrite All Products?

Should you design teleunderwriting for every underwritten product you offer?

Yes, because on any product in our spectrum, the teleinterview is vastly superior to any resource you have ever used when it comes to taking risk history.

HankGeorge, Inc. just completed a life underwriting requirements survey of 135 U.S. life insurers that offer fully-underwritten coverage.

I can tell you that 3 out of 4 of these 135 companies now do teleunderwriting ON SOME BASIS. Some do it only for a specific product and/or distribution system; most do it for all underwritten business.

In this context, it would be a shame if you believe the myth that says teleinterviews are “not suitable” for high face amount older age business.

It boggles my mind that anyone would be gullible enough to believe that the risk history, either at older ages or for higher sums insured, should be preferentially taken in any way other than a teleinterview.

Are producers, paramedical techs or doctors suddenly better suited to taking medical history information because the applicant happens to be age 70 instead of age 45?

With age and amount of cover, the urgency of an accurate and complete medical history accelerates. Therefore, so does the urgency of using the best method of getting such a history!

You will hear some people say: we ALWAYS get a physicians’ report at that age (or amount), so why bother doing a teleinterview?

Bollocks (as my friends say in the UK)!

The risk history from the applicant is not made irrelevant or of minimal importance simply because you will be going after records from his physician.

Therefore, to say otherwise makes so little sense that you know you’re getting smokescreen verbiage in lieu of the truth!

And what is the truth?

That the chief underwriter simply does not have the courage to “ask” producers in this market to “agree” to teleinterview-mediated history-taking!

All self-righteous “pomp and circumstance” to one side, folks, when “the tail” (producers and their advocates) wags “the dog” (underwriting, which is the gatekeeping process for mortality and morbidity), the outcome is all but inevitably to the eventual bottom-line DETRIMENT of the insurer and its reinsurers; everyone, actually…except “the tails” themselves!

Hopefully, this has been helpful in considering how you will deploy the #1 method of risk information gathering in the history of individually-underwritten life, health (medical), disability (income protection), long term care and critical illness (dread disease) insurance in your company.

Consider going the “whole 9 yards,” which is “Big T” if that is what is needed; or, save time by embracing “Little T,” if you can manage to make it work. Consider both options carefully; then, act.

Stamp out redundancy wherever it exists; redundancy is everyone’s foe.

On every product and in every distribution mode gather your risk-related history with a human-to- human interview. Other alternatives don’t match up.

And don’t believe that baloney about how teleinterviews should not be used at those (older) ages and on those (bigger) cases where getting a complete and accurate risk history is – paradoxically? – most urgent of all!

Next month, we will look closely at choosing your options as to how and by whom the teleinterview is done…and what the implications are for the decisions you make in this regard.