Reflections on Two Teleunderwriting Articles From the United Kingdom

Hank George, FALU, CLU, FLMI
September 2008

In the November, 2007 issue of General Re Life and Health’s Risk Insights publication there was an article by Dave Nicholas, Underwriting Manager in the United Kingdom, titled “Using the Telephone as an Underwriting Tool.”

In other words, teleunderwriting.

I discovered this piece a bit belatedly and then learned of a more recent piece by Dave in the March, 2008 issue of this esteemed periodical.

After reading both carefully, I e-mailed Dave and asked if he’d mind me writing about what he said, adding my own observations and comments.

Dave had no objections whatsoever (thank you, my friend!)…

…and so, away we go!

Terminology

Dave used the term “telephone data capture” (TDC) as a synonym for the process of information gathering in teleunderwriting. I have never heard this term used here in the states. Be that as it may, TDC nicely captures the spirit of the teleinterview process.

The use of the term “teleunderwriting” in America could be challenged as a misnomer, considering that we use it to describe information gathering rather than actual risk assessments based on teleinterview-derived information.

The actual underwriting aspect is perceived in a more traditional sense. That is to say, the underwriter uses the interview content as a surrogate for traditional answers to application risk questions and then proceeds much as he or she would in a conventional setting by using that information with all other screening requirements in hand to make the core decision: do I need medical records (APS, GPR, PMAR)?

Dave notes that in the states we put “underwriters on the phone” to a greater extent than in the U.K.

To this I would say that while some companies (still) do ask underwriters to conduct interviews and in most cases make all possible underwriting decisions in the spot, this is mostly true for health (medical) insurance rather than life and other products.

Years ago, a few larger U.S. life companies tried to force the proverbial “square peg into the round hole” by compelling life underwriters to do interviews.

The result?

Substantial attrition – underwriters leaving to go elsewhere where this “egregious demand” was not imposed on them – because talking to proposed insureds is not generally seen as an appealing task by underwriters.

Dave observes that U.K. teleinterviews are mainly done by customer support representatives or nurses.

In the states, we have a wide range of individuals, based on education and experience, doing interviews. The dominant species among major outsource providers is an individual with little or no underwriting-related background or medical education. This is good news for cost control and, sometimes at least, bad news for interview quality.

The issue of interview quality and content has raised the question of whether confining the interviews to scripted questioning only is the wisest approach. Unfortunately, any move toward going off-script, even minimally, is impeded by the fact that this requires a significant degree of sophistication with regard to aspects of medical knowledge, or, at the very least, the ability to recognize when an answer is insufficient or suggestive of the need for further probing.

It is at best uncertain whether we can expect many U.S. outsource teleinterview providers to be able to accomplish this, at least at present and in the term-near future. Indeed, if I were disposed to organize a firm offering outsourced interviews, I would be keen to develop my calling staff in a way which they would be both fluent and comfortable with going off-script to the extent necessary to assure maximum disclosure and high quality content.

Disclosure of Sensitive Information

Dave states – and one can only nod in agreement – that one of the greatest advantages conferred by teleinterviewing is the capacity to develop sufficient information to underwrite “sensitive” impairments.

Dave cites psychiatric disorders and substance abuse. These are the two best examples, to which I would add sexually-transmitted disease, problems associated with sexual dysfunction (ED – erectile dysfunction – which is a prime example, and one clearly significant with regard to chronic diseases), histories of being abused and likely others as well.

Producers (agents, brokers, intermediaries) have a track record of profound reluctance when it comes to adequately questioning their clients on these matters. Moreover, the paucity of information in medical records regarding these matters – as well at anything with the “G” word (genetics) involved – is a source of longstanding frustration to all veteran underwriters.

Bottom line: if you want high quality risk histories on sensitive impairments, you must use teleinterviews executed by pleasant (ideally, female?) voices, asking questions in the gentlest manner possible.

Reducing the Volume of Medical Records Needed

Were it not for this consideration, then the only compelling argument for teleunderwriting that could have propelled the concept forward in the states is turnaround time…and considering that the slowest requirement is almost invariably the doctor’s report, the two core benefits of teleunderwriting (“faster and cheaper”) are enmeshed.

We can now state without equivocation that if an insurer commences teleunderwriting and as little as one year later does not realize notable reduction in APS ordering, there is a major flaw in how teleunderwriting is being carried off by that carrier.

The glaring flaw is underwriter reluctance to act on teleinterview drilldown content in lieu of repeating long-entrenched learned behavior: “we always get an APS for ---- [fill in the impairment].”

Before we address this knotty problem, we must acknowledge that, as in the U.K., most American insurers doing teleunderwriting properly have experienced a substantial reduction in medical record ordering. The relative extent of this, of course, depends on market (elderly vs. middle-aged), sums insured (jumbo vs. more modest), products (disability income vs. life) and the level at which medical reports were tracked down prior to the advent of teleinterviews.

I know companies which have reduced their APS volume by 60% – the number cited by Dave – and others whose net reduction has been only 5% to 10%. But even a modest decline in “APS dependency syndrome” should yield benefits, which, when taken together with the others, earn the decision to embrace teleunderwriting a “thumbs up”!

Underwriter Reluctance To Foregoing Medical Records

Dave rightly observes that “underwriters remain reluctant to discard [medical records]…” and this has been a problem here, too.

This insidious (one is tempted to say, internecine) problem cannot be solved with a “band aid,” much as some would wish it to be.

At least four distinct issues come into play in this regard:

1. There will always be some veteran underwriters who will argue that you cannot underwrite this or that condition without medical records. They will not only resist doing so but possibly undermine ideal use of drilldown information by peers. Sometimes recalcitrant individuals need to be moved into other roles, etc.
2. Underwriters must have re-training when moving to a teleunderwriting environment. This should include extended discussion of drilldown questionnaires as well as plenty of case examples.
3. If the underwriting manual is configured in such a way that it is APS-content dependent – and most are – this acts to inhibit interview-based decision-making and increases the likelihood that medical records will be pursued in order to fit the case into diagnosis-driven manual parameters. You will need auxiliary guidelines based on teleinterview bits of information to compensate and thereby optimize the rendering of decisions without medical reports.
4. Performance audits of underwriters must consistently reflect support for making decisions without securing medical records. If the audit process, conducted by veteran underwriters, “punishes” those who do this, it must inevitably incite the retrenching of old habits. Underwriters have to protect themselves and if doing things “the old way” means better performance reviews, count on them not changing their ways. Make sure the auditors are “pro-teleunderwriting” and that they reinforce the right messages!

Too Much Information on Teleinterviews?

Dave makes the point in both of his articles about the problem of some teleinterviewers collecting “…too much or irrelevant information from the applicant.”

I beg to differ here, if only because of the North American mindset.

We would always err on the side of “too much” rather than risk the “alternative outcome” (not getting enough)…and this can be a mighty thin line!

The driver is, whether or not salient information is gathered by what we ask in the drilldowns. It is a sound practice, as some have found, to periodically test the validity of the drilldowns by reviewing the quantity and quality of information yielded by specific questions. In this way, those which are counterproductive can be eliminated or modified.

A related issue is the “clean application.”

In an engine-driven environment, clean cases are ideal because they process swiftly. Those who are not using engines (which includes most U.S. companies at this writing) also appreciate the clean cases because they fit a jet-issue model handily.

This said, beware the delusional thinking which assumes that “clean” necessarily means CLEAN.

I am a firm believer of teleinterviewing all applicants, “clean” or otherwise…at least at some reasonable threshold of cover. We have seen too many “clean” cases achieving this status either through applicant nondisclosure or the producer “malfunctioning” in the role of information gatherer.

This is most worrisome on older age applicants…

…certainly at age 50+ overall and especially the elderly (who represent a rapidly enlarging proportion of U.S. new business).

Indeed, at several of my life study groups we discussed the “clean older age applicant syndrome” at length and you could sense that most chief underwriters were (correctly) leery of cases where people in their 60’s and beyond profess to have only trivial medical encounters (or, worse, no history whatsoever!).

This flies in the face of common sense.

Suffice to say that you would be surprised at what we unearth with teleinterviews in “clean” scenarios. Our experience is consist with the (radical ?) notion that a completely clean application at age 60 or over is inherently uninsurable…due to the overwhelming likelihood that material matters have gone undisclosed.

Agents and Teleunderwriting

Dave speaks of concerns for “control” of the client/applicant as being the #1 issue producers have with teleunderwriting. He’s right. As I explained in an earlier essay published at this website, the fixation with “control” is, in the end, a mere “urban legend” which we can debunk easily.

What teleunderwriting does do…and producers should sing its praises because of it…is remove their obligation for gathering risk histories. This has always been an oxymoronic function for them and it puts them in a potential liability situation where there is nondisclosure which carriers believe was driven by the failure of the producer to do his job.

If I were a producer, I would be delighted to dodge this “smoking gun” and have more time to sell in lieu of doing head office’s job for them!

What is the Bottom Line?

Dave finishes his 2008 article with this statement:

“Based on our findings, we consider the advantages outweigh any disadvantages.”

Just so.

Anyone who looks objectively at what we have accomplished with teleunderwriting – and here I include enhancing the quantity and quality of protective risk information as compared to prior modes of collection – and says they are opposed to using teleunderwriting…is either comatose or harbors an ulterior motive.

We have seen a major shift – from skepticism to embrace – where teleunderwriting is concerned amongst reinsurers doing business in North America. Whether this is based on resignation or genuine enthusiasm begs the question. What matters is that if reinsurers are quoting premiums to direct-company clients using teleunderwriting which are as good (if not better, which we are seeing now) than those offered to traditional underwriting environments, then there is nothing left to say.

The Association of British Insurers (ABI) has come out “pistols blazing” in favor of teleunderwriting. While America has not experienced an equivalent outpouring of such “official” sentiments – nor are we likely to, considering how our insurance system is regulated – we should take comfort in the ABI’s position and recognize that not only is teleunderwriting here to stay…

…it is such a smashing success (when done right) that it has put all traditional alternatives on the path to extinction!

Thank you, again, Dave for courageously permitting me to use your two excellent articles as a baseline for this essay.

And, above all, thanks to you and to General Re for your unreserved endorsement of teleunderwriting!