In marketing (by which we mean ‘running businesses profitably’ and not advertising/promotion, account management or selling stuff) they talk of ‘the four Ps’:
- ‘Place’ (ie distribution channel)
Together these elements are known as the marketing mix, and they combine to form the basic proposition that is offered to customers; tailor the mix to your target audience and you have the right product at the right price, sold in the right way, backed up by advertising and other forms of promotion that create awareness and demand.
For service industries – life insurance is a good example – three extra Ps are often considered necessary to the basic marketing mix:
- People (think how much our industry relies on people to give advice, sell, conduct tele-interviews, service policies in force, administer claims, etc)
- Processes (currently, and rightly a hot topic with a great deal of thought being given to the customer experience or customer journey – and providing it all as cheaply as possible)
- Physical evidence (things like letters and forms, and the fixtures and fittings in company and producers’ offices.
Underwriting and underwriters figure strongly in most of the seven Ps – in fact the only one in which they don’t is promotion. But underwriters should have a say in product design, helping avoid unsound features and refine specifications. The underwriting philosophy to a significant degree determines price and it also needs to be appropriate to the distribution channel – and the channel used says a lot about the target market.
The quality of underwriting personnel is crucial, not just in making technical case decisions but also in forming underwriting strategy, underwriting philosophy, shaping the new business process (see below) and contributing input to those product design and pricing decisions. Underwriting process is a key part of the new business process: not only, via its speed and degree of complexity, does it please or irritate customers and intermediaries, but it can form an important component of the core proposition to the consumer. Forms – apps, APSs, questionnaires and the like – are an integral part of the underwriting process; their design (length, wording, layout etc) determines whether they yield the right information, and often good results hinge on making the job of completion easy, especially given that almost everyone is so ‘time-poor’ these days.
The underwriting fraternity could do worse than refer to the ‘underwriting mix’ – not least to strike a chord with their marketing-oriented colleagues. We have said before that because the underwriting process influences so much a) the formation of the relationship between customer and the organization, b) the risk of lapse and c) the payment of claims (especially straightforward payment of claims and avoidance of rejections and disputes), the chief underwriter should have a direct report to the CEO; his or her role is that important. At the very least underwriting should stand on a par with the other disciplines that create products and market them to consumers.
Underwriting isn’t a back-office process, it’s a front-line activity. (It’s just that the people who do it are largely not visible.)