Critical Illness: Comms, Tech & Data are Key Factors

This Opinion piece looks at how communication, data sharing and technology can minimise unpaid protection claims. It’s by Jeff Woods, Head of Intermediary Development, Legal & General

The potential loss of a loved one or the life changing diagnosis of a serious illness is a situation no one wants to think about. Whilst many people choose to protect their families financially from these worst-case scenarios, unfortunately due to misrepresentation, there are instances when families have to deal with the shock realisation that the financial compensation they thought they were due would actually not be paid.

Across the protection industry, misrepresentation is relatively rare – for example, Legal & General paid out 97% of individual life protection claims in 2021, with only a small number not paid. But it’s still an important issue customers need to be aware of.

Of the claims not paid, nearly nine in 10 were due to ‘deliberate or reckless misrepresentation’. This is when full and accurate information on lifestyle factors such as drinking, smoking or diet are not disclosed, despite it often being information within the customer’s knowledge.

How can the industry address the issue of misrepresentation?

Tackling misrepresentation is a multi-faceted challenge which intermediaries and underwriters are equally party to.

One approach to minimising the risk is through improving our communication with clients. Insurers can streamline the application process itself, ensuring the lifestyle questions for clients are clear, jargon-free and unambiguous. Intermediaries play an equally important role in stressing to clients the importance of submitting fully accurate health and lifestyle information when completing an application.

For both the intermediary and client, it can be tough discussing topics like smoking, drinking, BMI and underlying health conditions like high blood pressure. However, it’s essential to talk through these difficult questions to reach an accurate answer. Yet despite intermediaries’ best efforts to obtain the medical information, sometimes the customer will not be forthcoming.

The role of data sharing and insight

At Legal & General, the Distribution Quality Management (DQM) team works closely with our intermediary partners to share insights on applications and reduce both the risk of misrepresentation and policy cancellations.

An essential element of the team’s work involves the “Check Your Details” (CYD) post-application process. The CYD is integral to identifying and mitigating misrepresentation risk, as it essentially gives the customer an opportunity to thoroughly review the personal and lifestyle information already submitted in their initial application. It also provides an opportunity for the customer to disclose information they might not have been comfortable sharing with an adviser.

Weekly CYD reports offer intermediaries insights into their customer segmentation thorough visual analytics, enabling them to identify groups of customers most likely to forego the CYD process. This provides the intermediary with the information needed to ensure effective communication with the clients most at risk of providing inaccurate lifestyle information.

While CYD can be an effective means of offering the client a second chance on an individual basis to disclose key health information, it’s the insight provided by the DQM team that really enables our intermediary partners to tailor their communication approach and minimise the risk of misrepresentation.

Technology to tackle misrepresentation

The industry can now go far beyond what was once possible in terms of minimising the risk of misrepresentation and unpaid claims, by using data and technology. This helps improve customer outcomes for our distribution partners and policy holders, for example:

· It saves time: processing data, subsequent analysis and creation of user views that previously took hours to perform can be carried out within minutes.

· Enables more frequent updates: most output and subsequent analysis is now conducted daily or every few days, having historically being monthly or even quarterly. This means any areas of concern for customers, i.e. negative trends, are flagged quickly.

· Breadth and depth of data: better quality data allows us to monitor and cross reference more data fields, which has vastly improved our ability to understand the interactions and outcomes for customers and partners.

We’ve found that data visualisation and the ability to cross reference and analyse data has enabled us to better understand relationships between factors and drivers that have positive impacts for all. We are also identifying potential issues at an earlier stage, allowing corrective action to be taken if there’s a risk of misrepresentation.

However, the data itself also needs to illustrate these insights clearly to all users of the information, so we have developed our skills to construct meaningful, interesting, and useful users’ views and dashboards. In addition, we have created intermediary-facing support material to help drive positive change. Using data-led approaches helps intermediaries better understand some of the potential risks they are facing, as well as ensuring customer outcomes remain a core focus.

At Legal & General, we are also using predictive modelling techniques to identify potential areas of concern early, such as misrepresentation. These areas include indicators of possible customer detriment or unusual patterns in business activity.

For example, we highlight where disclosures or policy retention rates may not be in line with expectation. Allowing intermediaries to focus on opportunities to improve engagement with customers at key stages, right from the start of a relationship with their clients, ensures they have the protection they need and expect.

A future without misrepresentation

For Legal & General, combating misrepresentation is a real priority. The industry is at a turning point whereby data sharing, and innovative technologies will lead to a new era of risk management.

As insurers leverage the new tools at their disposal to minimise the risk of misrepresentation, customer confidence will increase and retention levels will remain high. Through the latest technologies and data-sharing insights, underwriters and intermediaries can work towards eradicating instances of misrepresentation in future, so no one goes without support in their time of crisis.

About alastair walker 10540 Articles
20 years experience as a journalist and magazine editor. I'm your contact for press releases, events, news and commercial opportunities at Insurance-Edge.Net

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