For insurers underwriting is about two trade-offs:
- More underwriting requirements always, to some extent, reduces sales
- More underwriting can improve the risk performance of a book, but adds upfront cost
But what are the trade-offs for the client?
- On the minus side more underwriting takes more time, and is essentially about helping the insurer decide whether to charge you more money, so discovering something the client did not know about has a direct effect on that equation
- Of course, discovering a medical condition may allow for early treatment, management, and a better health outcome. For the healthy client the time and effort is pure waste on an individual basis. But maybe there is a gain as a member of the risk pool – perhaps cheaper premiums, or a gain to sustainability.
I have heard some advisers talk about how the underwriting process has forced doctors to open up to clients more. I have also had some make a case for more underwriting at outset reducing the scope for ‘argument’ at claim time. But such a case would be predicated on a combination of factors: an outwardly healthy client, with an unnoticed condition, that wouldn’t result in the application being declined, that subsequently claims, and the condition has a bearing on the claim. Such a case could not be common.
We are interested in possible customer benefits from underwriting. Do write and let us know if you can suggest any.