“The theory is that diabetes and, in the case of The Exeter, also obesity, can be underwritten in a more precise manner, and the better the underwriting we have then the more likely people are to be able to get cover.”
However, the products have not been breaking any sales records, and The Exeter acknowledges that its much broader Real Life plan – launched in November 2018 to cater for people with multiple health problems or complex medical histories – is doing three times the level of business of Managed Life.
There are advantages from insurers not knowing everything about each individual, as it means they can offer them a pooled risk term.--Andrew Wibberley
Market challenges
Chris Pollard, chief operating officer at The Exeter, says: “The big challenge is that the advice process is quite complex and it’s hard for insurers to get IFAs’ attention.
“Another reason why the Managed Life approach probably hasn’t caught on with other insurers is that it’s very expensive for us to underwrite the medical evidence.
“We only accept around 2 per cent of cases via technology whereas standard insurers use technology for somewhere around 80 per cent of cases.”
The Exeter and Royal London also face competition from a number of intermediaries specialising in non-standard health risks and high-net-worth IFAs which have their own underwriters who carry out their own form of tailored underwriting.
Jerry Brown, head of underwriting and claims at IFA Salus, says: “I would always prefer to place such risks via another specialist market that bespokes the cover than to use the Exeter-type product.
“Because we mainly deal in high-net-worth cases, we tend to shop around individual underwriters. This doesn’t give people the chance to improve their premium annually but we could rebroke every three or four years and seek better terms.”
Importantly, this high-net-worth tailored approach also avoids the need to have to engage the policyholder every year to provide further medical information, which is undoubtedly one of the greatest challenges facing The Exeter and Royal London.
But it is unlikely that either version of tailored underwriting will ever be perceived as more than a niche area.
Andrew Wibberley, director of underwriting consultancy Alea Risk, says: “Every adviser, customer and charity says they want more tailored underwriting but at some point you lose the benefits of the group approach.
“There are advantages from insurers not knowing everything about each individual, as it means they can offer them a pooled risk term.
“So, as information on particular risks gets better and better and enables you to get the best possible terms for an individual, it might mean standard risks begin to lose out. Aspects of this are in fact happening already, so tailored underwriting is not necessarily a joyous one-way street.”
