The underwriter plays an integral role in the implementation of just about any business initiative that gets a green light from management.
More often than not, it seems, underwriting introduced the idea in the first place. Whether you agree with such statements may depend on your job description. However, all would agree that an underwriter’s perspective is certainly useful when it comes to launching a new insurance product. Here are a few ideas on how that perspective can benefit your company’s product development process.
Most underwriters have their ear to the rail when it comes to broker and client sentiment. Central to the underwriting role is attention to those things that bring in more opportunities to write core products. Obviously, aggressive pricing – often called acquisition pricing – of those core products is one way to bring in more business. But it’s probably not a viable long-term solution to this fundamental business challenge. More likely, broadening the appeal of your company’s products will have a more lasting effect. While efforts toward this broader product appeal can take many forms and involve multiple disciplines, an underwriter’s contribution can be most useful in developing new products and expanding existing ones.
So, what are the underwriter’s contributions?
Risk mitigation. Underwriters participate in the plan design process and formulate guidelines for selecting and pricing coverage for prospective clients. Underwriters act as gatekeepers to ensure adequately priced and fairly selected exposures are entering the company’s books.
Know thy self. It makes sense to develop offerings that fit well within your portfolio of products and that complement rather than compete with your in-force block of business. Underwriters can validate whether a product strategy is consistent with the carrier’s identity and mix of business. For example, a stand-alone AD&D product writer is probably better served by expanding the choice of coverage riders to its existing policy than by venturing into hospital indemnity insurance.
- Voluntary gap products are all the rage now. There are so many options that it is vital to maintain a focus on serving the bottom line. The underwriting department can determine whether it has the bench strength to handle voluntary products, which requires evaluating low-frequency claim products that are subject to adverse selection, such as critical illness. Maybe your shop is more suited to a higher-frequency claim product with minimal adverse selection concerns and less underwriting rigor, like voluntary accident.
- Improving overall portfolio persistency will relieve new business production pressures. What better way to deepen existing relationships as well as broaden the client base than with multiple product lines? We know multiple product bundles make all the business “stickier” and harder to move. An underwriter’s perspective on what to bundle or when to upsell is key to keeping the competition at bay and not leaving money on the table.
Market intelligence. The underwriter plays a consultative role in helping sales understand how and why certain product features help or hinder risk mitigation and may influence the final product design. Ultimately the goal is to build a product to sell more business, but writing the right business is equally, if not more, important.
- Understand what commission structures are commonly quoted for the product. If multiple options are typically quoted for a product, knowing your distribution’s preferences is important in the product development process. Heaped commission in the group marketplace may lead to increased churn and carrier hopping. That said, to be competitive, you may need it. An underwriter can offer insight into what conditions can help mitigate the persistency or lapse concerns that come along with front-loaded commissions.
- Knowing the competition’s contracts (including variable benefit options) and understanding your company’s risk appetite are vital. Consider whether benefit amounts, waiting periods, pre-ex limitations and guaranteed-issue limits expected by the market are in accordance with that risk appetite. Building flexibility into the offerings is essential. Pressure to meet or beat the competition can add a compounding impact on adverse selection. This area is certainly in an underwriter’s ‘wheel house’ and their input is essential.
- Understanding the commonly used enrollment methods and medical underwriting requirements is critical, especially for the aforementioned voluntary gap products. Most underwriters will have a finger on the pulse of the latest and most effective enrollment methods. With the increase in online enrollment platforms, voluntary benefits are often reviewed on an accept/reject basis to speed decision time and give real-time enrollment approvals/denials, improving take-up rates. In a purchasing environment that places emphasis on fast, efficient transactions, consider how requests for amounts greater than the guaranteed issue will be handled. Simplified or full medical underwriting will require additional time and resources, such as access to credit scores and MIB and Rx checks.
Distribution. One size does not fit all. A great group life producer doesn’t always make for a great voluntary products salesperson. Underwriters often know who among their producers fills the bill and who doesn’t. Perhaps an existing distribution channel expressed a need for the product. Maybe a currently employed third-party administrator has an enrollment function. Enrollers can be worthy producers, too. The bottom line here is that you need qualified producers who are already well-versed in the product’s value proposition and who are able to hit the ground running. Educating and coaching new producers consumes time and resources. Regardless of how quickly you can develop and file your contracts, the experience level of your distribution network will impact your speed to market and product launch timeline.
Product administration. Underwriters may not run these systems, but they can be quite familiar with where the warts are. Legacy administration systems often lack the capability to administer the new product from online enrollment straight through to claims. Smooth processing means happy customers and happy management. Modifications will likely have to be made on the fly, so factor that timeline into the process.
Education. Consumer education is essential to the success of new products, and this is especially true with the emergence of so many employee-paid offerings. Underwriters are in a unique position, situated between the products and the sellers, and they can share their knowledge of and belief in the product with the distributors. Underwriter enthusiasm breeds producer enthusiasm, and knowledgeable and enthusiastic producers should lead to greater group participation percentages. This is significant because although minimum participation requirements seem to be disappearing from proposals, obtaining acceptable levels of participation is necessary to cover your expenses.
Even so, as important as underwriting involvement is, professional enrollers or dedicated onboarding teams will typically take the lead in consumer education and enhance the buying experience by assisting those consumers in making educated (needs-based) purchase decisions. The effectiveness of enrollment efforts is the single most important determining factor in the success of these voluntary gap products.
It takes a team effort to bring new coverage options to the consumer market. The successful execution of such an initiative should generate a number of benefits for your company, and underwriters’ insights and active involvement can help optimize results.
- For a deeper look at this topic, please see: Innovation - Through the Eyes of Actuaries
Contact RGA LAD to learn more about underwriting product development.
RGA Group Insurance Insight is published by the Group Reinsurance Teams of RGA Reinsurance. This publication’s mission is to provide news and information to group insurance professionals and to support the group insurance market. The information contained in the articles represents the opinion of the authors and does not necessarily imply or represent the position of the editors or RGA Reinsurance Company. Articles are not intended to provide legal, consulting or any other form of advice. Any legal or other questions you have regarding your business should be referred to your attorney or other appropriate advisor.
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