Increased personalisation in health and protection underwriting will lead to smaller and more pools of risk.
This is according to Matthew Bone, head of underwriting and claims for UK and Ireland at Munich Re, who was responding to a question about the risk increased personalisation within health and protection underwriting poses around stopping insurers looking at risk pools and exploring risk at too narrow a level to give as much benefit to as many people as possible.
Participating in a breakout session at the Association of British Insurers Annual Conference at the QE2 Centre in Westminster today, Bone explained risk pooling has always been a core principle of insurance and companies.
“While risk pooling has always been a core principle of insurance, for many years life insurers have segmented and provided personalisation anyway. So that’s always been the case.
“For example, today we see insurers segment based on how they sell products, so the journeys that customers have to follow to buy their products.
“For example, we see a lot of life and health insurers offering fully automated journeys in a ‘buy now’ process. That ‘buy now’ process will typically provide less application questions and a fully automated journey.
“What that means is some applicants fall out of that process because they don’t fit that small niche and have to undergo a fully underwritten journey.
“The fully underwritten journey will typically involve more application questions, probably third party evidence as well.”
But Bone maintained while some insures will focus on simplified risk, others are happy to pick up more complex risk.
“So I don’t think there is a risk of people becoming uninsurable because of the customer segmentation into smaller groups that we are likely to see,” he continued.
“And I think the digital landscape enables insurers to better understand their customers and when I say better understand, what customers needs are before the customers even knows what they need and then tailor the products to suit customers’ needs.
“I would say risk pooling is a core principle of insurance and will stay as a core principle of insurance,” Bone concluded.
“What I think we will see going forward is probably smaller pools but more pools and I don’t think that’s necessarily a bad thing.
“I would say we will continue to see the trend of the last few years of widening access to insurance and being able to offer cover to more people.”