Risk advice under pressure: Working together for positive change

Adviser Ratings reported that in 2023, just 480 advisers were responsible for writing half of all new business, highlighting a stark concentration of expertise.

This concentration is further emphasised by the industry’s broader landscape. Over 5,000 “low risk” advisers write only a small number of policies each year, while an additional 10,000 or so advisers write no risk business at all. This disparity presents both a challenge and an opportunity for the industry to re-engage these advisers and drive growth.

Compounding these issues, client needs are becoming increasingly complex. Rising health issues, both physical and mental, along with evolving client expectations, are placing greater demands on advisers. As they strive to provide comprehensive and affordable advice, the pressure on underwriting processes has never been higher.

The importance of field underwriting and early data collection

Field underwriting, where advisers gather detailed health and lifestyle information early on, is a critical skill that’s becoming less common. It helps advisers give accurate advice and avoid surprises. But with less training available, many advisers, especially new ones, aren’t as familiar with these techniques.

The need for comprehensive field underwriting is particularly important given the increasing number of health conditions that need to be considered. Mental health, in particular, has become a significant factor in underwriting decisions. Where previously some conditions might have been automatically excluded, insurers are now working to find ways to assess and include clients with mental health histories more fairly. However, this requires advisers to provide detailed, accurate, and nuanced information from the outset.

We recently conducted a survey that revealed 43 per cent of advisers see pre-assessments and underwriting as significant challenges. This underscores the critical need for improved processes and support in this area. Furthermore, 46 per cent of advisers expressed interest in receiving help with their risk advice processes, indicating a clear appetite for improvement and growth in this sector.

Inadequate fact-finding early in the process can lead to delays, rework, and frustration for both advisers and clients. It can also impact the quality of the advice provided, as advisers may not have a clear understanding of the likely underwriting terms or outcomes.

The rise of pre-assessments

One area that has seen notable change is the underwriting process, particularly the rise in the use of pre-assessments – that is, looking to receive preliminary underwriting assessments for clients. These are becoming essential tools for advisers seeking to avoid surprises and secure the best possible outcomes for their clients. However, with the growing complexity of health issues, pre-assessments can add another layer of work for both advisers and insurers.

As the industry evolves, there’s growing potential for AI-driven solutions to guide advisers through the pre-assessment process. These technologies could ensure comprehensive and accurate data collection, particularly benefiting less-experienced advisers and support staff. By standardising the health discovery process and accounting for varying levels of adviser expertise, such innovations could significantly streamline the pre-assessment stage.

The call for better training and industry support

Given the reduced emphasis on risk advice training in recent years, there is a growing need for more comprehensive support and resources for advisers. The demands of the industry have shifted, and advisers must be better equipped to handle the evolving landscape of health and underwriting challenges. This includes not only understanding the technical aspects of underwriting but also developing strong relationships with underwriters to better manage client outcomes.

Our survey findings further emphasise the need for better support: 60 per cent of advisers identified the cost of advice (viability) as their top obstacle, followed closely by compliance concerns at 58 per cent.

Despite these challenges, there’s a silver lining: 43 per cent of advisers expressed a desire to increase their focus on risk advice, highlighting a significant growth opportunity if the right support and systems are put in place.

Enhanced collaboration between advisers and underwriters is crucial. Open lines of communication can provide invaluable learning opportunities and help advisers make more informed decisions for their clients. Moreover, insurers need to consider how they can support advisers more effectively, whether through improved tools, clearer processes, or better access to underwriters for real-time advice.

Insights from industry experts

To further explore these issues and gather more perspectives, we recently hosted a Risk Conversations webinar with three chief underwriters from leading insurers: Amber Brockie (head of underwriting, MLC Life Insurance), Karen Janes (chief underwriter, AIA), and Marcello Bertasso (head of underwriting and claims management, PPS Mutual). The discussion provided valuable insights into the current state of underwriting and highlighted several key challenges and opportunities.

One of the key themes that emerged was the growing use of pre-assessments and their implications for both insurers and advisers. While these tools are helpful for reducing uncertainty and providing early insights, they can also add to the workload and strain on resources.

As Brockie explained: “The volume [of pre-assessments] has increased exponentially ... We’ve still got work to do in solving that, but this tool alleviates some of the pressure.”

The conversation also underscored the need for a more robust approach to field underwriting. Janes emphasised the importance of getting back to basics in this area and highlighted the need for advisers to gather comprehensive information early in the process: “It’s all about capturing the complete picture, which can mean the difference between standard rates or a decline.”

Similarly, Bertasso pointed out that advisers should not shy away from engaging directly with underwriters to get the best possible outcomes for their clients. He noted: “Less is not more when it comes to underwriting. Giving underwriters the full picture allows for a more accurate assessment and can sometimes lead to better terms.”

Moving towards a more collaborative and data-driven future

The challenges outlined by these industry leaders reflect broader trends and pressures within the risk advice sector. As product features grow and claims incidence rises, it is clear that underwriting practises must evolve to remain relevant and effective. This includes leveraging new technologies and data sources, developing more flexible underwriting frameworks, and ensuring that advisers are well-supported and informed.

As the industry trends towards AI adoption, there’s potential for significant improvements in efficiency and customer experience. The future of risk advice lies in fostering collaboration between insurers, advisers, and technology providers. By working together to develop and implement innovative solutions, we can address the current challenges and create a more robust, efficient risk advice sector that better serves clients and supports adviser growth.

There is a strong call for the industry to embrace a more collaborative approach that includes better training, support, and communication between advisers, underwriters, and insurers. By focusing on these areas, we can help ensure that risk advice remains a vital and valued part of the financial services industry.

Conclusion

While the risk advice industry faces significant challenges, there is also great opportunity for growth and improvement. By focusing on enhanced data collection, better training, and increased collaboration between advisers and underwriters, we can create a more efficient and effective process that benefits all stakeholders. The key to success lies in embracing change, leveraging technology, and fostering a culture of continuous learning and support.

As we move forward, it’s crucial that we:

1. Prioritise comprehensive field underwriting and early data collection.
2. Invest in ongoing training and support for advisers.
3. Enhance collaboration between advisers, underwriters, and insurers.
4. Leverage technology to streamline processes and improve outcomes.
5. Focus on re-engaging “low risk” advisers to drive industry growth and expand access to quality risk advice.

By addressing these areas, we can reduce surprises, achieve better outcomes for clients, and ensure that risk advice remains a vital and valued part of the financial services industry. The path ahead may be challenging, but with commitment and collaboration, we can build a stronger, more resilient risk advice sector that better serves the evolving needs of our clients.

The time is ripe for change, and we look forward to working together to make it happen.

Marc Fabris is the founder of Risk Hub.