The most significant developments to date, as far as making life easier for intermediaries is concerned, have been the 2007 launches by both Bupa and Canada Life of automated systems providing the ability to quote and place straightforward business online for schemes with between 3 and 100 lives. More complex cases still need to be referred for manual underwriting. Canada Life’s CLASS system, which is arguably the more sophisticated of the two, even enables renewal business to be conducted online and offers a range of reporting functions.
Daniel Stewart, CLASS business development manager at Canada Life, says: “Industry-wide it normally takes 55 to 60 working days for an intermediary to put a new piece of business on the books, obtain the inception accounts and deal with the first year’s renewal, but with CLASS it all takes about 30 minutes in total. The feeling is that there is definitely a need for an online capability in group risk because that’s what intermediaries are familiar with from other products, and they need to keep administrative costs as low as possible.”
CLASS has already been used by 2,500 individuals since launch and Bupa Group Risk Online by 1,500 individuals, and feedback from intermediaries on both is broadly positive. The fact that the systems can only quote for clean business is, however, a commonly expressed gripe because a lot of SME group risk business involves loadings or non-standard terms, especially for switch business.
Unum has indicated that it is likely to launch a similar online system but will not indicate when. It has been actively studying the current two propositions and observes that they seem most popular with schemes of 20 or 30 lives. Most other providers do not actually rule out following suit, but Friends Provident is a notable exception.
Steve Browning, product manager, group protection, at Friends Provident, says “We prefer people to submit applications manually so the scheme underwriters can use their skills to assess occupations. The concerns we have from speaking to intermediaries is that, when using online systems, they have to enter occupational details themselves and there could be a significant margin for error. Insurers have different attitudes towards different occupations and many intermediaries would prefer that the insurer makes the assessment so that it ties in with its own underwriting philosophy.
“Some intermediaries have said that if they have to enter occupational details on both portals separately it takes longer than if they send a single email to all insurers and let the insurers do the work. They also fear that if they enter people into a better class of occupation than they should have done there could be complications at the claims stage.”
Opinions are notably divided on whether it could eventually be possible to evolve a pan-industry quotation engine for SME group risk business along the lines of those available for individual protection business. Those who feel there is no chance of this happening tend to stress that group risk requires more sophisticated data than PMI, for which claims are much higher in volume but lower in average value, and that there is still no whole-of-market quotation system available for SME PMI business.
Alan Thacker, senior consultant at Buck Consultants, says “For income protection and life you need to take account of issues such as the long-term sick and postcode capacity limits, and these make it far too complex. Each company has its own rating basis and reinsurance terms, and these are far too variable and are price-sensitive issues.”
Nevertheless, these seem similar to the problems that Bupa and Canada Life have managed to overcome in offering single company automated systems, and industry body Group Risk Development (GRiD) is currently looking into the possibility of a pan-industry equivalent.
Simon Derby, director of i2 Healthcare, says “I think technology is a wonderful tool but the only criticism I have is that we have to input data into each individual engine. It’s fine if you are looking for a quote from a single insurer because you are trying to get a straightforward case on risk very quickly but it’s very time consuming for whole-of-market activity.
“A pan-industry quotation system shouldn’t be impossible and I don’t think people have been trying hard enough. GRiD is still working on standardised documentation and this will undoubtedly help any attempt to create an industry-wide quotation platform, but anything beyond SMEs will never be possible as it would be too complex.”
Other recent technological developments volunteered by providers are less ambitious but welcome.
A number of insurers offer the chance to track medical underwriting online, and Aegon Scottish Equitable has done a lot of work on an online claims tracking service, enabling intermediaries to follow the progress of claims and employers to receive automatic monthly updates about claims activity. Legal & General has launched an interactive training guide for income protection claims and is providing intermediaries with the ability to bespoke web pages offering discounts on non-insurance products.
But it is clear that a number of substantial developments are lying just around the corner, especially with regard to using technology to remove administrative overheads and claims management costs. In particular, Aviva is starting to make decisions about what to spend on back office developments, and Aegon Scottish Equitable is looking to make technological progress in the area of data cleanliness and data transfer.
Andrew McMillan, senior group risk manager at Aviva, says “There is a growing appetite from intermediaries to use technology to improve the sharing of information with insurers. All the technology is there, it’s just a case of providers and intermediaries embracing it. As with the group PMI model, where hospitals and providers use e-hubs to exchange billing information electronically, it would be good to share some of the underwriting or quotation information. Our products all share a lot of central features, and the appetite is there and growing from both providers and intermediaries.”
Technology will, however, never be more than an enabler for effective processing, and will only ever be truly effective when used in conjunction with the right people. New market entrant Zurich Assurance therefore deliberately led on the customer journey and built its systems to support it.
Nick Homer, group risk development manager at Zurich Assurance, says “Systems don’t have to be state-of-the-art to be effective and, although technology certainly has a role to play in improving service, the key to improving it is understanding what a good service proposition looks like and providing the appropriate level of personal support, backed up by technological support.
“There are clearly some areas where systems can help. In this industry the bar is fairly low in terms of service and one of the biggest reasons for delays is gathering data, so technological improvements should help in this respect. The more we can align with HR systems the better as the biggest advance is getting early notification of claims, and a good HR platform can really help in this respect.”
Whilst the bulk of technological advance is always likely to be in conjunction with the SME sector even this will have a significant knock-on effect to the larger group risk market by freeing up intermediary time.
With commission typically 4 per cent on group life and 12 per cent on group income protection and critical illness cover, commission-based intermediaries who are concerned about the bottom line could be forgiven for wanting to focus the bulk of their energies on the larger cases.
Online discounts pose a problem
Intermediaries who use either of the automated systems for SME business are able to enjoy favourable terms. Bupa Group Risk Online provides discounts of around 10 per cent over Bupa’s standard business and Canada Life’s CLASS charges a policy fee of only £100, compared to £300 via the manual route – which can make a significant difference when premiums are only a few thousand pounds.
But Mark McLeod, group risk and healthcare manager at Towry Law, finds that this approach creates more problems than it solves. Although it saves the client money it means that he effectively has to do the work twice. He says “Initially I will contact all the providers on our panel via the same email. Then,
McLeod: “Effectively you have to do the work twice”once I have received the quotes and it looks as though Bupa or Canada Life could be more competitive through their automated systems, I have to go online and do the quotes again. Whilst these systems can help intermediaries who only wish to get quotes for one or two players they are much less use when it comes to giving whole-of-market advice.
“You either need all providers to offer quotes online or none to do so. Or, if only some are going to do so, there should be no price differential for going online. “