The growing popularity of simplified underwriting products is stoking the evolution of applications which have developed from basic digitized copy in PDF format to platforms that can mirror the intelligence of an experienced underwriter.
PDF electronic applications based on paper forms are still in use, but more and more insurers are adopting a tool fuelled by metadata analysis and artificial intelligence. They are flocking to solutions that let advisors sell policies faster and enhance clients’ experience. They are also harnessing machine learning to minimize bad risks.
Equisoft CEO Luis Romero cites studies that show that electronic applications (e-apps), particularly smart forms that guide advisors through the questions, generate savings for insurers. Such forms contain fewer errors, so insurers can ask for fewer details. “Savings are optimized if the e-app is integrated in an insurer’s pricing and underwriting engine,” he says.
Equisoft offers its clients a smart form in which questions, and even other forms, are added dynamically based on a set of logical rules. “If you answer yes to the question about participating in extreme sports, the hazardous sport form appears. Advisors can ask fewer questions. They simply follow the fields that pop up. This boosts efficiency. We have produced this application based on a 43-page paper form. It can easily integrate 3,000 business rules specific to the insurer,” Romero says.
Among its competitors, Equisoft lists Telus, and iPipeline, an American player trying to penetrate Canada. “We are also seeing lots of customized development by insurers,” he adds.
Michel Fragasso, engineer behind the Fundserv investment fund transaction platform and founder of the firm Planeffico, says that a few years ago it would have cost a company $300 to issue a life insurance policy using the traditional process. These costs are certainly not lower today, he says. However, “with a digital process where advisors, MGAs and insurers are interconnected, these costs could drop to $150,” he says.
In fact, most insurers offer some form of e-app. Assumption Life, Canada-Life (together with Great-West and London Life), Desjardins Insurance, Empire Life, Canada Protection Plan (an MGA), Equitable Life, iA Financial Group (including IA Excellence), Humania Assurance, La Capitale, Manulife, RBC Insurance, and Ivari are all on board. However, the solutions that insurers offer vary, and do not allow data exchange.
Breaking new ground
Other players including, Foresters Financial and UL Mutual are poised to enter the game. BMO Life Insurance has just launched an e-app, Daniel Walsh, vice president business development confirms. Following a soft launch with MGAs, “Phase 1 involves an app for term insurance and critical illness products. We will launch phase II for whole life and universal life in 2018,” he says.
The application accepts electronic signatures on a touchscreen on a tablet or smart phone. “It will boost efficiency for firms that process large volumes of transactions by eliminating dual entry on both paper and digitally,” Walsh explains.
Why wait so long? “Not being the first let us better understand and launch a solution well adapted to advisors’ needs. We have enhanced the functions and made the app more intuitive, so it’s easy for advisors to navigate through it,” he says.
UL Mutual is doing strategic analysis, the results of which will be announced at the beginning of December when its strategic plan will be disclosed, CEO Christian Mercier says. “UL Mutual is about to make a major shift. To do so, a few months ago we appointed Jean-Mathieu Sigouin to oversee our technology aspects. We have planned working days on September 13 and October 6,” he adds.
RBC Insurance released an e-app in spring 2017. Maria Winslow, senior director for life and living benefits product management, says that the electronic process is currently limited to the sale of term insurance products for up to $500,000. “Term policies are sold through e-app, and then progressively disability and critical illness insurance. We’re not selling UL policies on electronic applications yet, but will eventually go there. We’ll look to increase the coverage limits when we get more comfortable with the process.”
Winslow thinks insurers should make it easier for consumers to buy insurance. “People buy everything online in two or three days. Life insurance is a little behind. Consumers’ expectations are rising and our goal as an industry is to shorten the timeline,” she explains.
In addition to speed, consumers appreciate being able to do business wherever they want. “An e-app perfectly meets that need and makes the process more comfortable for the client.”
Stéphane Beaumier, regional vice president of the career channel at Sun Life Financial Canada, says that the e-app is constantly becoming smarter. It is no longer just a digital copy in PDF format. “At Sun Life Financial, the electronic application has evolved over the years and we have no plan B. Only the e-app; no more paper. What’s more, our application is not based on a PDF. It’s integrated in our software.”
For its electronic application for advisors, the insurer offers an optional telephone interview service provided by Hooper Holmes (acquired by Dynacare in early September). “We recommend that advisors use the telephone interview service to gather medical information from clients. We eventually want to get to medical underwriting done fully by telephone interview,” Beaumier explains.
Currently, only 35 per cent of advisors use this service “That’s a good rate considering that we have offered it only for the past two or three years. Like any change, people need to get used to it. We need to demonstrate the added value of this service to advisors. When you combine the e-app with the telephone interview, the compliance risks and the risks of false statements are reduced,” Beaumier explains.
Paving the way
Luis Romero says that Sun Life paved the way in the market by linking its application with projection tools used in its insurance products. This interconnection boosts the penetration rate of the application, as does the environment specific to the career network. In brokerage, however, advisors are hesitant to adopt connected projections. “I find the demand for illustrations that are not connected to an e-application surprising. Will insurers tolerate this for long, or will they dare to tell their advisors: ‘It’s about time you got connected’?”
The e-app’s penetration rate in brokerage is also weaker, and shows no signs of rising, Romero observes. “Many advisors prefer to scribble on paper even if the e-app would let them cut the issue time from weeks to days. By cutting out paper, you can respond to clients faster. You can do other things during the process, more sales, which mean inevitable gains for advisors and insurers alike.”
Advisors should use the electronic application when meeting with clients, especially since the form features pricing and underwriting tools connected to the insurer, Romero says. “In a selection process without exams or tests, advisors can get a response and compensation immediately. One of our clients pays the advisor electronically the same day that they receive an acceptable insurance application,” he adds.
The client experience is also enhanced, Romero adds. “If the client’s initial application is rejected, the advisor finds out when they are still with the client, so they can immediately offer another company’s product. They won’t lose the client. With the paper process, they have to inform the client of this rejection, which is never pleasant. It is then even harder to convince the client to buy another product.”
Sun Life’s application is linked to internal software, and questions evolve: each question leads to other ones or other sections of the form, depending on the client’s answer. This intelligence makes the sales process more compliant, Stéphane Beaumier says. “Advisors cannot skip a question or leave it blank. There’s also room to leave comments. The electronic platform eliminates many risks for the insurer because you can’t make a mistake with an e-app.”
The telephone interview conducted by Hooper Holmes also lets advisors save time, Beaumier explains. “Medical underwriting accounts for most of the time spent completing applications: on average over 20 minutes per application,” he explains. The medical interview done by health professionals can pinpoint risks. “It lets us go faster and further in risk underwriting. It also reduces the risks of false statements and fraud,” he says.