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E-business life protection should be about consumer convenience, ease of access, low cost and immediate fulfilment.

This should maximise sales for insurers and advisers without introducing compliance or non-disclosure risks.

However, as an industry, e-business invariably means electronically enabled traditional business. In part this is due to limited systems capability. But it is often also due to mindset, not helped by regulation and ombudsman paranoia.

This can be seen in the ‘one step forward and two steps back’ we have taken with tele-interviewing. Life protection should be a one-stop sale, particularly for term assurance. At the very least the adviser should never lose control of the sale.

So what role does tele-interviewing play? And if it is required, should the adviser or the insurer do it?

Before we get into the debate, it is probably helpful to clarify the terminology.

Tele-interviewing is the gathering of customer data - particularly medical information - as part of the application process, by trained administrators over the phone. This can be done by the adviser, the insurer, or a third party working for either.

In contrast, tele-underwriting is where trained underwriters contact the customer for more in-depth medical information in order to avoid requesting a GP report. This can only be done by the insurer and is wholly aligned to the objective of speeding up the policy issue.

21st century underwriting requires a “customer present” application process. A customer interview cannot be avoided – either face-to-face or on the phone. With the customer present and leading edge e-business systems, including advanced reflexive underwriting questions, it should be possible to make automated decisions in 60 per cent plus of cases for most products. This compares with the average straight through processing rate of 30 per cent.

A “customer present” sale and application process can be completed in one step and a break in this process should only be introduced with very good reason – based on customer convenience rather than for the distributor or adviser. Research from Axa confirms what many of us know, particularly with financial services products, which is that many customers drop out of a multi-stage sales process. This is particularly so with customers who engage with the process through the internet.

Tele-interviewing is a subset of the “customer present” application process, and is often the most practical way of interviewing the customer. There may be good reasons to separate the sale and application process for example, where the former has been time consuming; or to make the consultant and customer more comfortable with handling confidential information; or to make the best use of people’s skills. And of course for some specialist distributors their business model is heavily phone-based.

Before introducing a second step, the adviser should weigh up the cost benefit. There is invariably additional cost, as a different person will have to review and take ownership of the case. In addition, there is the cost of contacting the customer, which may take several attempts. There are also the unquantifiable costs of a weaker customer relationship and a lower incentive to close the sale. It is worth noting that between sale and application customers - particularly internet customers - may look around at price, or a distributor who can handle the process better. Others may just lose interest.

So in the real world, it is best to issue the policy in one stage. A second stage to the process should only be used when this is unavoidable from the customer’s point of view, or could risk consumer detriment.

Some will challenge this statement and quote better non-disclosure rates from trained tele-interviewers, but is more of a reflection on the benchmarked provider’s poor systems and processes. With a well designed “customer present” reflexive underwriting system, including relevant and clear questions, the level of material non-disclosure should be identical, except for the odd deliberate non-disclosure that may be identified.

However, let us assume someone can make the case for a two or more stage sale and application process. Who should make the call? The adviser? Their back office? The insurer? Or a third party working for either the adviser or insurer?

At the point of sale the customer relationship is with the adviser. The cost of handover to a different organisation will be greater than within the adviser firm. Distributors know that losing control of the application to the insurer invariably causes them frustration and additional costs. Almost without exception insurers are poor at processing non-STP applications, as evidenced by the need for distributors to compensate with big distributor back offices to chase insurers and stay close to their customers.

To justify a two stage, two organisation process, insurers will argue that they or their third parties will do a better job in completing the tele-interview process. There is no evidence of this when compared to first class 21st century systems and processes. There is however no question that it increases costs and reduces sales.

Once again it is critical to measure the cost benefit. While there may be some apparent initial cost savings for the adviser, it is highly likely that this is outweighed by the costs of abrogating control and subsequently chasing the insurer and re-contacting the customer, plus the lost revenue from customers who choose not to proceed.

In summary, the sale and application process should be as simple as possible and, except wherever this is unavoidable from the customer’s view point, the adviser should remain in control of the process. We should also assume that customers are honest. Almost all cases of non-disclosure are due to poorly designed questions or processes. Of course, belt and braces practices will always capture some exceptions, but these steps may damage distributor businesses and limit the growth of our industry.

And finally, to reiterate, the argument for tele-underwriting is totally different. This can only be done by the insurer and is wholly aligned to the objective of speeding up the policy issue.

Martin Werth is managing director of Fortis Life