rating accuracy


Richard Webb


DIRECTOR MANCHESTER UNDERWRITING MANAGEMENT


AQuestionof Insurance


E= minus MC2 mass of proposal questions; and C2


- where E is the enjoyable buying experience for the consumer; M the ... a thumping big number! The more questions,


the less enjoyable the buying experience. Richard Webb explains the consequences of getting the balance wrong


t comes as no great surprise that most people don’t put buying insurance on their list of ‘100 things to do before I die’. We all know the buying experience for insurance isn’t the most fulfilling, and so to ease the pain underwriters and insurance brokers have tried to improve the process. Proposal forms have gradually become shorter, or dispensed with altogether. Many have evolved into statements of fact that clients simply read and sign. And fewer questions means underwriters can speed up their service. Taking this a step further, online quotations mean both public and brokers can answer a handful of short questions to obtain a quote and bind cover. Suddenly, the painful process of buying insurance is easier.


I Ouch!


However, as many customers, brokers, and underwriters find out to their cost, the short cuts are not always ideal. Some insurances can be written on limited information, but there are clear dangers with others.


When a client or broker


completes an online questionnaire, 14 insurancepeople NOVEMBER 2011


is their interpretation of a question the same as that of the underwriter? Let’s take professional indemnity as an example:-


digested? The point here is not just the need to protect the website’s liability, but to ensure that policies purchased do what the buyer expects.


Too many questions?


Underwriters will update and refine their online questions to avoid these situations, but the pressure to keep the number of questions to a minimum is great. The more questions, the less enjoyable the buying experience.


Another danger for customers who buy direct is the risk of purchasing a product they may not fully understand. How many understand the claims made basis of PI policies and the need for retroactive cover? I’ve seen people buying cover with retroactive dates of inception year after year! Websites may have some information, but are they ever


Many underwriters try to keep the number of questions to a minimum. We are conscious that in the past we sometimes asked too many questions. Some had no effect whatever on the quotation, but provided an indecisive insurer with a crutch. The proposal is the tool an underwriter uses to build a mental picture of the risk. A good underwriter can read between the lines to assess the exposure. However, for the sake of speed of service the underwriting process has become formulaic.


Experienced insurance brokers find themselves frustrated by underwriters who can only follow a prescribed formula.


The broker is then faced with the challenge of trying to explain to a formula-focused underwriter that when the “computer says no” perhaps as a human being they should think independently and


An actuary wanted to buy a professional indemnity policy online - a profession many underwriters decline. That occupation was absent from the long selection list, so ‘management consultant’ was selected. Subsequent questions did not reveal the actuarial background, leaving the actuary believing in adequate cover and an insurer who believes he has insured a management consultant. What happens when the claim arrives?


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