Customers hate application forms! It’s the first experience in the insurance process, and a terrible way to begin a relationship. It’s the insurance industry’s way of saying, “we don't like you; we don't trust you; and you must prove to us that you’re worthy of spending your hard-earned money on our services”. Applications are complicated, poorly designed, time-consuming and require a lot of information not readily accessible to customers.
Application language is purposely confusing, relying on terms like “material misrepresentation” or “representations and warranties”. Who speaks like that? Insurance professionals know the word “material” refers to “any information that may influence an underwriter to accept or reject the risk; set the terms; or set the premium”. But customers don’t know this. Conveniently, there is no policy definition. Even if there was, it wouldn’t make it any easier for customers.
Let’s be honest - application forms can only benefit the insurer. They are used as a weapon against the customer at the time of a claim, when material misrepresentation is suspected or if the customer has violated the representations and warranties. That’s when the industry digs deep in its files to find the application and avoid paying the claim. Insurance is supposed to be a relationship industry, but the application is very unfriendly.
Interestingly, the information gathered in an application is not very good. Better data about the risk is available through other sources, and insurers often buy that data in addition to taking an application form - strong evidence that the only purpose of an application is to trap the customer.
Think about this: Do you know when your house was built? I don’t know mine, only that it was sometime “around” 1890. In 2017, does it really matter if my house was built in 1890 or in 1920? It’s been gutted and rebuilt about five times since then.
Why ask a customer if they’ve been convicted of a crime? Will they really answer honestly? Is it worth all the underwriting energy and cost to put that question on an application form, when the answer is almost guaranteed to be useless?
It’s time for the insurance industry to think beyond the application form; become more customer-friendly while actually improving underwriting data. At Slice, we’ve eliminated the application form. Our customers are happier for it, and we like to think we’re earning a better reputation for the industry.
We also believe it will improve underwriting results through better data and more transparent relationships with our customers. In our claims process, we’ve introduced many new techniques using behavioral economics to reduce the risk of dishonesty. This approach will be significantly more effective than relying on the formal declaration signed on an application form months, and possibly years, earlier.