Designing Life Insurance Application Forms Fit for Changing Times
When filling out an application for insurance, a person typically faces questions that are comprehensive, somewhat complex, and perhaps even a barrier to getting the business done. This is particularly true of life insurance application forms dominated by health-related questions. The underwriters’ aim - to get profound levels of disclosure - is frequently at odds with the marketing department desire for simplicity; customers despair at what they see as extensive and difficult questioning.
A commonly mooted solution is to do away with application form questions altogether. But insurers need comprehensive information to make a fair risk assessment, which can only come from asking each applicant about his or her personal risk situation. It’s important that the applicant shares relevant facts to help the insurer generate a quote. Since many risk factors are involved, the typical result is a form containing multiple questions. Adding examples within health-related questions, designed to help customers recall relevant data, makes forms even longer.
In response, there is a trend to scale back application questions. The approach merges questions to make them general and non-specific, using fewer words. Questions become declarations an applicant need only answer once. Designs have become a topical subject among rival insurers, and the number of questions is often the key to winning or losing in marketing stakes.
Extremely scaled-back designs limit the age at entry or the maximum insurable amount, and are reserved for use in a certain context, such as covering home loans. Short forms like this mostly work well despite some examples where too little underwriting meant experience suffered negatively.
However, levels of satisfaction with most application form designs have not increased. This may be attributed not only to the number of questions but to asking about complicated matters and using unfamiliar language. A person may have received medical information years ago, perhaps at an examination, and is unlikely to have the documented medical history at hand. Some questions ask people to disclose the proportion of manual labour involved in their daily work or their participation in dangerous pastimes. But what, they may wonder, is meant exactly by manual labour in this context and what defines “dangerous” from an insurance perspective?
There is a psychological barrier, too. The questions primarily concern risky, sometimes negative, personal characteristics - illness, behaviour, lifestyle, work hazards and dangerous sport - things people are often reluctant to think about, are likely to suppress or wish not to share. In addition, their willingness to recall and provide information is affected by concern that the information may result in an increased premium or being denied coverage.
Above all, technological developments and accelerating digitisation are the strongest drivers of change in the insurance industry - including change in the insurance application process. The focus has shifted: Now the customer, especially the customers experience and satisfaction, is in the spotlight. Viewed through customers eyes, the application process appears in need of improvement to fit with changing times.
The first products and services to fully embrace the requirements of the online digital era are emerging. Questions are shorter, simpler to understand and with content supported by visual language. Health-related questions are less frequently arranged in an organ-specific structure.
In a virtual paradigm shift, insurers are considering asking more questions about aspects that positively influence risk assessment, for example, the risk-reducing effect of physical activity. This contrasts with a traditional approach that only factors in the dangers of certain sports and rates the sports as increased risks.
This approach aims to meet the changing demands of customers, including their expectation for a rapid and intuitive life insurance application process. But it’s important to remember that without the assistance of brokers or agents to explain questions, customers are on their own. They must be able to understand the meaning of questions, or the quality of answers will suffer or even cancel the process rather than risk an incorrect answer leading to a loss of cover.
Much current thought is aimed at how to collect risk information by different means and with significantly less effort for consumers. The opportunities provided by new technology - be it fitness trackers, facial analysis from “selfies,” or analysis of speech, social media or genome data - are currently being researched and discussed, and their applicability in an insurance context is being examined. It remains to be seen whether any of these methods will one day render application questions obsolete.
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