At the recent 4th Annual Insurance Forum in London one of the main topics, as you would expect, was the declining sales due to the lack of trust of the consumer caused by high rates of declined claims due to non-disclosure.
It occurs to me that the very word “non-disclosure” is part of the problem. The word “Non-disclosure” implies the blame for not collecting the appropriate information is due to the applicant – they are not disclosing what they should be disclosing. Quite frankly, this is pointing the finger at the wrong person.
The main problem lies in us as an industry not being diligent and thorough in collecting the information in the first place. There is a fundamental misconception in the industry that, if a straight forward question is asked, then a straight forward answer will be given. This is pure fantasy. We only need to recall the last time we spoke about an illness to a friend, or even our doctor, to realise that this is not a simple process. In our daily lives questions and answers are never that simple.
Politicians provide us with examples on an hourly basis. Bill Clinton’s statement "I have never had sexual relations with Monica Lewinsky” was upheld in the senate after a 21 day trial, although it did leave a stain on his character.
When we look at non-disclosure figures, i.e. what is missing from the application processes, we find that approximately 70% of information that should be recorded is in fact omitted. We also know the vast majority of this is due to the lax process being adopted and that outright fraud is the smaller proportion.
Lie detector systems are, at first sight, sexy technology that can solve our problems - they will ensure that the customers are telling the truth. Indeed, there may be a place for this technology in the industry, but they are solving the wrong problem.
The main problem is not fraud, it is purely that our existing application processes are too simple, and inadequate. One of the main reasons the application process is so poor is that no one wants to do it. The majority of advisors don’t want anything to do with asking medical questions. They find the process embarrassing, they have no training for this, they do not want the liability and hence they do a poor job. We should not castigate advisors for this, we are asking the wrong people to do the wrong job. Advisors are knowledgeable about financial matters, not medical matters. I would not expect a nurse to sell financial products, so why do we expect a financial advisor to collect medical information?
As repeatedly stated by reinsurers and brokers at the Insurance Forum last week, advisers should not be asking detailed medical questions. However, the present trend is for the life companies to push the process to the advisors, asking them to undertake the interviews, translate the answers and key them into on-line systems.
If we are to restore trust for our consumers to increase revenues, we need to listen to them and reduce the amount of contentious claims and not blame them for not doing a task we should have done in the first place. Fortunately, applicants do not dress up their answers as cleverly as Bill Clinton.
Andrew Gething is managing director at MorganAsh
The opinions expressed in this blog are those of the individual and not necessarily the company he represents.IFAonline
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