When cover gets stuck

Technology developed with one aim in mind has often brought other benefits that were unforeseen. For example, Teflon was an unexpected by-product of a search for safe refrigerants. Strangely enough, an unexpected by-product of a new system has resulted in some similarly useful non-stick properties in the world of group life insurance!

So how has this come about?

It was the fast, inexpensive online underwriting system that created this new opportunity for the client to secure a better deal

It goes back to 2009 when Ellipse, the company of which I am CEO, was launched. The idea behind Ellipse was to offer a digital group life insurer, with all of its new business and administration processes handled online. Of course, this included the underwriting of individuals whose cover exceeded their schemes’ free cover limits (the amounts of cover group policies will provide without the need for individual underwriting of the highest covers in the scheme ). While only a tiny minority of members ever need to be underwritten – a quarter of one percent of the total of people covered in our book since you ask – they are the most highly-paid and senior members, and often the very people making the final choice of insurer to cover their schemes. Providing a fast, efficient underwriting service is therefore very important. Or at least, you would think it would be important, but that hadn’t really been reflected in the quality of service provided by insurers in this market. Underwriting could take weeks or months to complete, if it completed at all. In many cases, the process took so long that the individuals being underwritten – typically busy executives with little time to spare – disengaged from it. The result was that their benefits were restricted to their scheme’s free cover limit, which could be well below the cover they were entitled to.

Ellipse’s member underwriting service offers a very different experience. We ask members to complete an online health questionnaire which is reflexive – that is, it adapts the questions it asks according to answers the member provides. In the vast majority of cases (83% to be precise), completing this questionnaire is sufficient to generate an instant underwriting decision. In the remainder of instances where additional information is required, a fully qualified nurse will conduct tests or obtain further information at an appointment arranged at a time and place to suit the member. Moving the time taken to reach a decision from weeks and months to hours and days was our original intention in developing our online member underwriting system, and that has been achieved.

There was, though, a second, unexpected opportunity opened up by handling member underwriting online. Having developed the online questionnaire, there is effectively no cost to Ellipse each time it is used. There is no paper form to produce, no postage and little or no manual intervention. This, combined with the speed with which results are delivered, opens up the opportunity to underwrite members on a more speculative basis, independently of the scheme being covered by Ellipse. This is extremely useful for schemes that have a number of highly paid people with benefits in excess of the free cover limit, as the overall premium – and even the amount of cover provided – will be heavily influenced by the underwriting terms applied to those members. It is even more useful in those cases where one or more members has been declined cover above the free cover limit.

This was exactly the position one of our clients, a small but very successful investment house. One of their founding partners had been underwritten and declined by their previous insurer due to cancer. Since then, though, the cancerous cells had been removed and the partner been given the all-clear by his doctors. Naturally enough, this prompted a request to the insurer to re-underwrite him – a request which was declined.

The client was left in an unenviable position. They could not get the cover one of the partners was entitled to from their current insurer. Nor could their advisers find them another insurer because cases where members have been declined cover typically meet with a ‘decline to quote’ response. They were effectively ‘stuck’ with their existing insurer, who, knowing this, did not feel any competitive pressure.

This is where Ellipse’s online underwriting system came into play. After being approached by the client’s advisers as the scheme’s next rate review loomed, we offered the client the chance to use our system without them being required to switch their scheme to us, regardless of the outcome of the underwriting.

In the event, the partner who had previously been declined cover was accepted with a very small loading of +25% to the standard premium. In spite of the extra cover provided, the overall premium – underwriting adjustments included – came out at around 30% less than what their previous insurer had been charging. Naturally enough, the whole scheme switched to Ellipse.

It was the fast, inexpensive online underwriting system that created this new opportunity for the client to secure a better deal. Certainly, no other insurer had offered a ‘no-strings’ underwriting option in the previous ten years that the scheme had been running.

There are likely to be a significant number of schemes that are stuck with their current insurers because there seemed to be no alternative. Now, thanks to a system designed simply to handle member underwriting in a fast, inexpensive way, these schemes have a new, ‘non-stick’ option for such schemes to consider.