Most insurers, pension consultants and medical data collectors, however, questioned the actual value of the information on the questionnaire:
“Because you only ask fifteen questions, no matter how well they are designed, there is only so much information you are ever going to get.”
Naturally, therefore, the questionnaire focuses on the largest and most important risk factors, such as smoking status, where there is a clear impact on life
expectancy and the pensioner can answer the question easily. A medical insurer explained:
“We have underwriting expertise and associated mortality tables, so that we can take into account the responses in the questionnaires in life expectancy and assess on risk on that basis. This is important as underwriting needs to be proportionate. Where pensioners have smaller pensions, you have a stronger proposition if you can assess on risk on the basis of the questionnaires only.”
The purpose of the questionnaire is, therefore, two fold. First, it enables the insurers to adjust the life expectancies for individuals whose pensions are too small to warrant the cost of obtaining further information. This allows the insurer to focus more resources on obtaining data for individuals whose health may materially affect the price. Second, it allows for adjustments to be made in respect of other medical conditions, either which do not require more detailed medical information or, in the interim, before such detailed information is obtained. Scheme members who respond with one or more medical issues, and who have pensions in payment above a threshold will be asked to provide further information on their conditions, so that the insurer can refine their underwriting. A common approach is the telephone interview:
“The whole concept of the telephone interview is you have an interview over the phone with a nurse, you can get a lot more information in an easier way for the consumer… One of the advantages of the telephone interview is that it is scripted and targeted… you focus very much on what information you require. Family history is very good from that source, lifestyle is very good from that source.”
Telephone interviews tend to be around 20 minutes and are either with a nurse or a trained underwriter. One traditional insurer questioned how much value there was in the information from a telephone interview:
“How do you extract value from a series of amorphous words where you’ve got emotional responses? We are quite good at encoding algorithms, but for someone to interpret what a 70 year old has said to a nurse in text form or via a telephone recording, and making an informed, objective judgement, it just seems that that is prone to error.”
However, insurers across the UK have a long history of using telephone interviews for their life business for policies such as life assurance, so it is likely that they have developed the experience needed to interpret them.
For members with the highest pension amounts and major medical conditions, the final stage in the underwriting is a report from their GP.
“You can ask for information more generally, you can ask for very specific information in a targeted GP report: please tell me about [your patient’s] cancer for example.”
According to a medical data collector, the process for obtaining a GP report is carefully regulated:
“General practitioners’ reports are controlled by the Access to Medical Records Act (AMRA), which places various restrictions on it, and is also controlled by an agreement between the British Medical Association and the Association of British
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Insurers - although the agreement between the BMA and the ABI was dissolved a few years ago, but everyone mostly stands by it. First, under the AMRA you have to have a signed piece of paper which says that the individual consents to have their doctor provide this information to that insurance company and there is also an option on there to say whether they would like to see that report before it goes to the insurance company and the timescales associated with that. In reality, very few people request to see the report before it goes to the insurance company, but they have that right under an Act of Parliament.”
However, the medical data collectors we spoke to went on to say that the information provided can be very valuable, especially regarding detailed information about specific conditions:
“What a GP report will give you is accuracy around medication – so dosage and frequency, also things like cancer staging, where was the tumour and grading… So from that point of view, it serves a purpose because it provides that extra level of detail.” “They can be very good bits of information, clearly at its best, it is a complete record of your health since your birth… but equally, they aren’t the be all and end all.”
However, they also said that obtaining GP reports can add to the time and costs involved in obtaining medical data:
“Obviously the cost per head of getting [GP reports] is more. I wouldn’t say it’s material, but it really does differ case by case and a particular GP as to how quickly you get that information.”
There appeared to be a wide variation in both the costs of obtaining GP reports according to a medical data collector
“The cost on average – well, some you pay VAT on, some you don’t, some you pay upfront, others afterwards – about £100 on average. We had one project last year where the GP said he wanted £200… The problem with doctors is that they think they can charge what they like.”
The medical data collectors also said that there was a wide variation in the length of time the reports took to return:
“There is a requirement under the AMRA for them to reply within a certain number of days, although they have never met that, but it is 40 days I think… Another project we did, we were chasing the GP report and the surgery said they would do it as soon as they could, but their backlog is to February 2015 and this was in November 2014.”
“GP reports can take anything from four weeks to three months to come back depending on the GP,”
and a wide variation in their quality
“What you get back varies hugely. Some doctors develop their own templates and go through it consciously telling you what they think you need, which may not be right, and others just hit the print button on their system, which gives you 50 pages of information which, in the middle, between all the ‘flus and ingrowing toenails, tells you that there may be some horrors. So going through those is a non-trivial job.”
It would appear that it is now the process of obtaining information from GPs that needs to be standardised and streamlined, rather than the other aspects of the medical-underwriting process. These issues will be especially important in top- slicing transactions, since more of the people being insured will be asked for GP reports if they have medical conditions because they have larger amounts of pension in payment.