Metropolitan Life changes the rules and sees early benefits
September 2006South Africa's life insurance industry is under intense competitive pressures to overhaul its products and become transparent and more customer-focused. In the face of this pressure, Metropolitan Life, a leading provider of life insurance services and products, has taken the bull by the horns with its "Retail Enhancement Initiative" (REI) and undertaken a radical redesign of its business processes.
The redesign tackles the life-blood of the business, its new business operations, and is designed to cut out redundant and non-value adding processes, streamline others, reduce cost and most importantly, improve the quality of service to customers and intermediaries.
Metropolitan has reworked its new business enrolment process with the assistance of its underwriting technology supplier Allfinanz. A crucial element of the process is the underwriting process. Existing paper-based processes, which offered limited scope for improved efficiencies, are being discarded.
The new approach uses the telephone to capture all proposals for new business, including insurability information. This move to the telephone enabled the introduction of rule-based tele-underwriting which utilises dynamic or "reflexive" underwriting questions during telephonic interviews.
Metropolitan Life has demonstrated that big business can be innovative and nimble. It is the first life insurance company in South Africa, and the first traditional life insurer in the world, to move its primary distribution to telephone processing and to offer customers instant life insurance cover.
"Concluding short-term insurance over the telephone is common," says the head of business development for Allfinanz, Alby van Wyk. "But this is not the case for long-term life products. The process to underwrite a life risk is far more complex. "However, using Allfinanz's xpertBridge system implemented by Metropolitan, the underwriting engine automatically assesses the life risk by intelligently querying disclosures made by applicants on subjects such as asthma. The software asks the right questions at the right time and makes an automated underwriting decision on the spot. And significantly, control of the underwriting rules remains with the life company. "They set up, maintain and evolve their own underwriting rules using our software," says Van Wyk.
"The challenge faced was to learn from the best underwriting practices we could identify globally, while producing something relevant to the segments of the South African market that we service." says Metropolitan Life product development manager for individual business, Greg Buckle.
The need to improve efficiency and customer satisfaction is not simply a nice-to-have for the industry. It is facing a sustained period of low inflation, which translates into lower returns in the long term.
Finding cheaper ways to do business has become imperative. "Our objective was to find a process and other improvements that would lead us towards more efficiency and a lower cost base. Among these were plans to source an automated underwriting system to improve the efficiency and consistency of our underwriting," says Buckle.
"We did not have the luxury of designing a new underwriting approach into a stable environment due to the wider changes being made to our new business process and systems," he adds. Care was needed to keep underwriting developments in synch with each change made to the remainder of the live new business systems and process. There was little to compare to in the South African market and international experience had limited applicability due to differences in the target market.
Despite these challenges the project was kept on time and on budget and took about 8 months from design to go live.
The beauty of the Allfinanz system is that after two days of telephone training from Allfinanz, the underwriting team was equipped to begin the creation of the rules base. They found the tool very simple and user friendly. It took four months to create a solid initial underwriting rules base on which to base system integration and testing.
Early evidence indicates that Metropolitan is on track to achieve its objectives. For instance, over 50% of cases are automatically accepted on standard rates or automatically offered special terms; disclosure rates from customers have increased and policy issue times have decreased.
"We are well positioned to make further transformations to our underwriting effectiveness because we are able to closely monitor actual experience using real-time management information; we have underwriting practices codified in rules that can be inspected more easily than before and are consistently applied, and our underwriters have the control and ability to modify those rules for next-day deployment without need for coding by IT staff," says Buckle.
"From a risk and underwriting management perspective the changes have been dramatic. Instead of being a passenger with limited control, we feel that we are now in the driver's seat with a full view of where we are and command of the controls."