PRACTICE MANAGEMENT

Strategies for improving life application honesty

“Wrong answers only” is a current social media fad – but it has no place in life insurance.

BY RUSSELL HUTCHINSON

There is a game played on social media where a picture is posted and captioned – along the lines of “Tell me what’s happening in this picture – wrong answers only.” That’s a great device for getting some comic captions.

It is almost the opposite of what we are trying to achieve with application forms for life and health insurance. Of course, almost all clients take the questions seriously. Most try to give the right answers. Some fail. Why do they fail and what – if anything - can advisers and insurers do about it?

It is worth asking why people give the wrong answers so often.

Forgetfulness

Sometimes they just forget.

With a busy life you can forget some pretty big things. I got my hand x-rayed after a cricket injury. Pointing out where bone had regrown around what they believed was a previous break in one of the small bones, they asked: “When did you break your hand?”

I had no knowledge of any break. But in my misspent youth, it was possible I could have done that and forgotten.

Possibly I wasn’t even aware when it happened. At times touch-rugby and cricket were pretty much liquid-fuelled affairs for me in the dim past.

Other motivations

Some people’s forgetting is a bit more, shall we say, purposeful than that. The important thing here is what the motivation is behind the desire to change the facts.

Fear, shame, people pleasing and fraud are candidates.

Fraud is very rare. Most people do not sit down and deliberately set out to defraud insurers – and along the way cause a lot of grief for their adviser. A few do. We can all recall cases. This column is not about them. Spotting deliberate attempts at fraud is a worthwhile study and deserving of its own focus. People pleasing and shame – social motivations to tell what the client might perceive as a “harmless” lie are the problem we face most often.

Fear or shame

Fear, or just being a bit scared, can make some people do things they regret. They have literally never thought about how to back out of a situation where, say, they are with an insurance adviser and their partner in life and are filling in an application form, and they see a question about, say, intravenous drug use.

They do not want to clarify. They have never talked about this with their partner. They panic – and tick “no”.

They know they should have ticked “yes” but now a few handy rationalisations creep in – “surely they don’t mean something that took place 30 years ago” or “well I only did it once … they probably mean drug users, right?”. Shame is another big one. It particularly comes into play when asking questions about health where some stigma may be attached to the answers. Perhaps the client does not wish to own up to sexual health issues, or mental health issues, or a same sex relationship in the past.

I know one actuary who has held roles running underwriting teams as well who made a study of non-disclosure and found this to be a major contributor.

Their view was that it is hard for the adviser to overcome a general social condition. Until New Zealand as a whole is more accepting, it will be hard for individuals to be more honest.

I know an adviser who made personal disclosure to the client – a tool to try and make them feel comfortable with the required disclosures.

People pleasing

People pleasing features as a contributor to untruths. Clients see you as smart, successful, and knowledgeable about the financial world. They want to appear smart too. That means not asking you too many dumb questions.

They also don’t want to muck this up – look like they haven’t done it before. They are thinking: What’s the “right” answer? And not really believing your little talk about the importance of the honest answer.

Especially a factor where the perceived power imbalance is large. Especially if it is felt – even subconsciously – that you would much prefer it if there were no health conditions to hold up underwriting. It is amazing how these moods can be detected by people even when not spoken.

Several things have been tried. Many advisers and insurers try hard all the time to get the truth from clients.

Training sessions on the approaches to running the part of the sales process on completing the personal statement have loads of useful strategies. Height and weight can be dealt with by carrying a tape measure and a set of scales.

Sharing personal stories of your own can help. Reading the legal declaration before completing the questions can help too.

Online or tele-underwriting

Offering alternatives such as completion at a different time, online, or using teleunderwriting services all have value.

Currently two big themes with insurers and reinsurers alike are using online applications and rewriting questions in ways which behavioural science suggest will gather better answers. These are both helpful, but not yet silver bullets, capable of slaying all dishonesty.

Online applications, or applications robots, have been found by several insurers to routinely generate more honest answers, under certain conditions, than when a human adviser helps the client. The necessary conditions are that the client is alone, believes the answers are confidential, and they do not imagine a human reading the answers.

Clearly those conditions do not exist all the time. Also, two problems beset the robots. One is that clients struggle when they do not understand the question – so often they abandon and need to call for help. Sometimes they just abandon. Improving the robot – often by imbuing it with more human characteristics, can help reduce abandonment but reintroduces the problem of social pressure, and with it, more lies.

Improvements in questions are worth exploring. These take time to have an effect. They are incremental and results are slow to come. They also exist within the contexts we have mentioned – social and systematic.

Theories abound. Like most persistent problems, getting the truth in application forms is difficult and complex. Improvements may only come from a combination of solutions in concert.

Probably the single best X-factor in the whole equation is you – whatever the systematic features, I believe that you can make a difference. A

Russell Hutchinson is director of Chatswood Consulting and Quality Product Research, which operates Quotemonster.