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Reinvent the insurance customer journey today: Revamp how we underwrite policies

Sir/Madam, do you want to buy insurance?

That question, unfortunately, has often been associated with mistrust in Asia, especially in Hong Kong and Singapore, and they are frequently used as examples of annoyance and coercion. While we know that insurance serves an inherent benefit to both society and individuals, the industry has gone out of its way to correct this sort of stigma by being efficient in paying out claims, reducing the number of pages to fill in, and reducing the disclaimers. Insurers though do face an uphill task in changing that misconceived first impression of risk transfer.

Why does it exist?  Well, we don't exactly know what we're paying for. For many people buying personal policies, insurance agents are recommended by close friends or family. Sometimes we don't even think it's necessary…and we feel even worse when we don't make a claim or when our claim amount is reduced by the insurer. Why am I paying more than my colleague in the next cubicle? What does my BMI have to do with this as long as I work out? 

I'll say this: these are valid grouses. But let me explain. In the past, re/insurers set premiums based on traditional data like age, gender, height, weight, medical history and more. These then help re/insurers determine how much risk you pose to their portfolio. This guides re/insurers to categorise applicants into different risk buckets such as preferred, standard, sub-standard. These initial classifications will then determine the amount of premium the applicant will need to pay for the next five,10 and perhaps 15 years - depending on the length of your policy. How reflective is your premium to your health and how you're feeling today? Probably not at all.

Today, we recognise that this is not what consumers want and that we can do better. So, it's changing.

Dynamic underwriting creates the opportunity for us to reposition how we evaluate new and emerging health risks from a single assessment – usually at the start of the policy - to ongoing assessments through the life span of the policy. This is made possible because the world is more digitally connected, more personal data is being generated, but most importantly, people are willing to share their personal data in exchange for benefits, such as pricing that reflects your health status. Swiss Re's recent Asia Health Protection Gap research shows that over 80 percent of the people surveyed are willing to share their wearable and fitness data with insurers if it reduces the amount they pay. Further, 50 percent of these respondents expect more than a 30 percent discount in premium. Remember: a reduction in health premiums puts more cash into the economy and that helps other businesses and markets grow.

Alongside all of this, people are also becoming more affluent, life expectancy is on the rise and people are more engaged in health and wellness activities. On the flipside, lifestyle changes also come with its issues. Societies are being hit with 'affluenza' – lifestyle-related illnesses associated with wealth and more spending power. An obvious trend we see in Asia is that more people are willing to spend money to dine "well" and eat more, which is one of the key drivers of obesity. The fundamental cause of obesity is when calories consumed are more than what is burned. This leads to an increase in BMI and ultimately that increases the odds of chronic – and sometimes irreversible – diseases.

Dynamic underwriting and a better use of data is the way forward. Digitalization is the enabler that is helping us change the game.

Chronic diseases contributes to 71 percent of all global deaths attributed to illness, according to the World Health Organisation. We know that diabetes and cardiovascular disease are avoidable if we can encourage healthier eating habits, more exercise and quit smoking. With that said, understanding the causes of medical conditions and how to leverage dynamic underwriting can be a real game changer.

Let's take a Type-2 diabetic as an example. In the past, they were either not able or had to pay quite a significant amount of premium to buy health protection due to their pre-existing condition, but this has changed. With digital health management tools and the ongoing underwriting process I outlined earlier, re/insurers can closely monitor a diabetic's medical condition, provide them with the right incentive (such as financial rewards) to reduce their sugar intake and maintain a moderate level of physical activity. Digital health management tools now help diabetics manage their own health, and this is what we have already done in Thailand with our partners.

With regular re-underwriting… wouldn’t this make the customer journey more complex? Surprisingly, the answer is no. Digital distribution channels and simplified underwriting approaches that ask fewer – but more relevant questions – make the entire journey more user-friendly for customers while enabling re/insurers to better assess risks. Digital wellness management platforms have minimised the nuances for customers throughout the re-underwriting stages.

Another real-world example we can share is what we did in India. Dynamic underwriting, working in tandem with a wellness management app is helping local insurers assess and access new and emerging health risks.

Policyholders are encouraged to actively manage their own health and set their own goals. They walk more to count steps, they log the amount of calories they consume and monitor their heart rate. All the while, they are rewarded for improvement and at the same time the personal data collected will enable re/insurers to determine the policyholder's premium discount upon renewal of their annual policy. This reward also provides incentives for existing customers to extend their policy while reducing the policy lapse rate from those that think they don't need to be insured.

Dynamic underwriting and a better use of data is the way forward. Digitalization is the enabler that is helping us change the game… and reduce the health protection gap. It's really time to think differently about policies, and we are excited with the innovation already out there, and what's around the corner.

So, if you're faced with a question on buying insurance, don't just say no but ask how it works!