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Underwriters’ Impressions 2007

Interpretation of those impressions by the author.

Continuing in a decades old tradition of the Canadian Institute Underwriting providing a great educational forum for underwriters from coast to coast every January they held another very successful seminar in 2007. The content was excellent. The speakers were at the top of their game. The organizers made sure every detail was in place for success. The attendees were there in force eager to learn and share their thoughts. I was fortunate enough to be asked to present on the subject of advisors/brokers relationships with underwriters. Over the last 38 months I have surveyed many advisors and MGAs on what is their perception of the industry and more particularly the underwriter and the whole new business function or process. The most recent follow up survey shows that the opinion of most if not all Canadian life insurers is that there service has deteriorated even further. The underwriter takes it on the chin even though they may not have started the perception.

But enough on that since it is the result of the survey conducted of the attendees which interests me the most right now. There were 75 attendees and they represented a true cross section of Canadian life insurers’ underwriters and indeed a representation from coast to coast. I was happy when 72 o the attendees completed the seminar’s questionnaire. Like advisors and brokers filling insurance applications not all questions were answered for various reasons. Overall the fewest answers were 64 for any one question. This would be I hoped at the time a truly valuable reflection of what underwriters were thinking on a wintry day in January just after the crunch of year end.

The first question asked each how many years they have had an underwriting authority level (the ability to accept or reject business on their sole signature, the power of the pen). I was surprised to find the range of years was from under one to over thirty three. The majority of attendees (46 of 72 respondents) had more than 5 years of underwriting authority. At the other end of the spectrum, twelve respondents had up to one year of authority and they were the ones without that glimmer in their eye from declining too much business (yet). A large benefit comes at this seminar when the neophytes challenge the establishment on the why’s and why not’s of underwriting. Open minded senior (in authority time frame) underwriters can learn to change if the neophytes push hard enough. Neophytes can pick up both good and bad habits from the more established risk taker.

Interaction with those who distribute the life insurers’’ product to me is key to successful relations between those who sell and those who stand in judgement (actually most sit at their desk). When I was a young know nothing risk taker my bosses sent me along with others like me to a course on communication and “selling” or probing. I learned to ask questions, respond sufficiently and deal with angry clients. I also as an aside learned working in reinsurance and dealing with insurers’’ presidents, actuaries and underwriters was far easier than dealing with those who sell our products. From the attendees responses it appears 45 of 70 have taken a communication or sales course. I am not convinced this high number is an accurate reflection of how many actually took a course other than a “good manners on the phone course”. I hope it is true that companies are finally seeing the merit in having risk takers learning more than what is the latest treatment for a weak left ventricle.

It was not surprising to learn only 37 of 72 respondents had any “one on one” interaction in the past two years with advisors! In fact only 11 of 72 had six or more “one on one” session with advisors over a two year period. I guess that explains why the chasm between advisor and underwriter has grown so wide. If you do not interact you do not grow in understanding and delivery. Is this isolation because underwriters just do not have the time or is it because companies want to isolate the decision maker from the advisor?

The question that I positioned as number four in the survey was the one I was most anxious to have an answer to since it was at the very foundation of our industry which is based on trust and in turn comes from forthright participants be they advisor, underwriter or reinsurer. I asked the respondents “what percentage of advisors are 100% forthright?” Starting with the young and uninitiated (one or less years of underwriting authority) we had 4 of 10 underwriters say advisors were 100% forthright 0 to 40% of the time. Not a good start for those who should still be building their own impression and opinion from experience not hearsay. But we all know how powerful gossip and hearsay along with urban myth can be. At the other end of the maturity spectrum, those with five years of underwriting battles under their belt were a little more split in opinions. 10 of 43 respondents thought advisors were 100% forthright only 20% or less of the time. 3 of 43 thought 21 to 49% of the time. Getting better were the 19 of 43 who felt it was between 50 and 80% of the time. Scoring an “A” were the 10 who believed advisors were 100% forthright 81 to 95% of the time. One lone underwriter with three years of authority answered that advisors are 1005 forthright 100% of the time. It was an anonymous survey so no I cannot pass on her/his name.

Am I an idealist when I would like to think that the target of absolute trust through full and complete disclosure should be at least 80% or better? Perhaps if our industry had more interaction and “one on ones” between the two solitudes we could improve the impression since that is all it is an impression.

The next question should have been divided in two to get a real impression of what underwriters think but as it stands it still worked. “What % of advisors do a good job of getting medical and financial information?” There were 18 of 64 respondents who thought advisors did a good job less than 50% of the time. One lone very experienced underwriter felt it was more like closer to 100% of the time. The remaining 45 of the respondents felt the advisor did a good job between 50 and 90% of the time. One added in bold letters that advisors do a better job getting medical information than financial information. Must not deal with financial advisors! This spit of respondents reflects the fact that some companies maintain that 20 to 40% of applications come in to the head office incomplete. What is missing is something from the mundane and trivial to the must have and a showstopper if left out. All would unanimously say this is a “marketing” or “distribution” department problem not an underwriting problem but it is the bad old underwriter who is blamed for asking for the complete answers. Yes we need to know if they had cancer or not and when and where. Da!

How do you judge an underwriter or for that matter an underwriting department? There are two components to the job. One is the quality of the decision. Is the case a standard risk based on best judgment or is there a need for actions like declining or rating the risk? Getting that right is not easy sometimes as there is a lot of grey around the risk selection process (the variables in health are amazingly huge). Make a rare error or exception and it is built into the price but make either too large an exception or too many exceptions and errors and the company will suffer financially (the financial burden of the errors though is often so far off it is hard to rally enough support for quality now because good quality costs money to accomplish). The respondents were almost, but not quite, unanimous in their believe that speed of issue is not the best measure of the underwriters but rather it is quality of their work. Only 4 of 69 respondents thought speed was the best measure. It is also notable that it was 4 underwriters in the 5 plus years of experienced decision making that opted for speed (age does make you faster and perhaps you forget that subconsciously you are worried about quality).

There has been a debate over the last few years as products and the fanciful sales concepts spread (how to make insurance not look like insurance is an art form). Those who sell our industry’s products swear the underwriter has no idea what the product is all about and thus have no right to underwrite it. The survey results show that 45 of 68 respondents believe the underwriter knows the product better than the advisor. There is a funny comment added to one of these answers which was “but that is not saying much!” That is a reflection of the fact the products or the concept is so complex no one understands what it can do or suppose to do. Glad the consumer is smarter than all of us as they must know the product since they buy it.

Over the last five years the reinsurer has been much maligned for causing too much angst amongst underwriters and in turn the distribution networks. We are blamed for everything from poor time service and declination of policies to global warming (the hot air thing). Okay here was the opportunity to ask in a confidential setting “Do reinsurers help with insurers’ quality and time service?” Of the 65 respondents to this question 60.5 said yes! The half a respondent comes from the fact that he/she thought that reinsurers help with quality but not time service. Was that their answer because it was a reinsurer asking the question? Was that their answer because they truly believe it? I like the latter.

Was the exercise worth doing? Absolutely since it in some ways confirmed my own opinions of where the underwriters were in their thinking these days and in other ways worried me that not much has changed in perception of the trust issue. We still have a lot of work to do on the “forthright” part and if we can get that number up to well over 80% across the board I am sure the quality of information will improve making the whole process faster — everybody then wins.

Written by

Ross A. Morton