Insurance: Delays plague application process

In July 2014, Winnipeg-based Great-West Lifeco Inc. (owned by Montreal-based Power Financial Corp.) implemented sweeping changes in the way new policies are processed at all three of its Canadian insurance subsidiaries: Winnipeg-based Great-West Life Insurance Co. (GWL); Toronto-based Canada Life Assurance Co.; and London, Ont.-based London Life Insurance Co.

The new system, called New Business Now, includes a new electronic insurance application as well as a broader overhaul of the companies’ traditional application and underwriting systems. The changes were designed to make the application process more flexible and efficient for clients and advisors, and were expected to reduce the time needed to issue new policies by up to one-third.

Instead of speeding up the process, however, technical problems have created long delays in the processing of new policies at the three companies, resulting in a hefty underwriting backlog. In many cases, issuing a straightforward insurance policy, which normally would take about a month, now takes three to four months.

“The delays have been totally unacceptable,” says John Hamilton, president and CEO of Kitchener, Ont.-based Financial Horizons Inc. “It has been very frustrating. It’s not good for the company; it’s not good for the brokers; it’s not good for the clients.”

The lengthy process is frustrating for advisors with clients who are waiting for their coverage to come into effect. Dean Whalen, advisor and co-owner of Lighthouse Money Management Inc. in Goderich, Ont., says he has a client who still is waiting on a life insurance policy after submitting the application to Canada Life in early October 2014.

“These are longer delays than I’ve ever seen,” Whalen says, “and I’ve been in the business for more than 20 years.”

The delays have been caused by slower than expected processing times, connectivity issues and challenges with data-entry productivity and quality, according to Troy Haugen, senior vice president, individual insurance, new business, with GWL, London Life and Canada Life.

“We have been working steadily to address these challenges, and while progress has not been as fast as we would have wanted it to be, we continue to see improvement as system issues are addressed and staff and advisors gain more and more experience with this new way of doing business,” says an email to Investment Executive from Haugen.

Specifically, the email says, the data-entry backlog has been cleared, data-entry quality has improved, and system stability and performance issues have been resolved substantially.

Advisors and industry executives are encouraged by these efforts.

“They have recognized the problem and are doing the best they can to alleviate it,” says Hamilton.

Edward McQuillan, vice president of The McQuillan Group in Toronto, for one, has noticed an improvement in processing times in recent weeks as the insurers have worked to resolve the underlying problems.

“Things are getting better, in terms of speed of putting an application forward and getting a contract,” says McQuillan. “The turnaround time is much quicker of late. But I think there’s a ways to go.”

Haugen admits that the insurers still have a variety of problems to resolve: “The companies continue to face a significant underwriting backlog, which we are now challenged to clear and which is the primary reason for our current poor service levels.”

In the meantime, the insurers have taken steps to address the backlog. For example, according to Haugen’s email, the insurers have waived the requirement for producing evidence of insurability for certain life insurance cases, extended term renewal dates and extended the temporary insurance agreements that clients can buy at the time of application while those clients are waiting for their policy to be issued.

McQuillan, for one, appreciates those efforts. “[The insurers] are trying,” he says. “They’ve recognized the problem, and they’re trying to put patches in place to make it easier for clients. It’s helpful that they’ve done that.”

The insurance companies also have done a good job of communicating with advisors and industry partners as the situation has unfolded, Hamilton says: “[The insurers] have been very up front [and] transparent, which has been very good.”

Nonetheless, the fallout of this debacle could be significant. The delays and service problems have made advisors such as Whalen reluctant to submit applications to the affected companies, and winning back that business for the insurers could take time.

“They would certainly have lost business because of it – there’s no question,” says Hamilton. “Brokers have gone to other companies because of the delays.”

Whalen says that although he’s had only positive experiences working with Canada Life in the past, his recent experience has made him nervous to work with the insurer until things improve.

“I won’t send anything else in until [my most recent application] gets resolved and completed,” he says, “and until there’s some kind of assurance that applications are going to get looked after on a timely basis.”

Given the strong reputation of the Great-West Lifeco companies, however, Hamilton expects that many advisors will work with the insurers despite the turmoil.

“It’s a very good company with very high service levels, and this is not a normal thing,” says Hamilton. “[The firm’s subsidiaries] have a very loyal following, so people still are going to be loyal.”

McQuillan says the recent challenges won’t affect his relationship with Canada Life: “We’re very loyal to Canada Life. It has great products and integrity, and this is our first hiccup.”

Although the extensive scope of the problems resulting from New Business Now has been surprising, challenges often emerge when insurers adopt major new technologies and processes, says Simon Tomlinson, CEO of Toronto-based BlueSun Inc., the firm behind the WealthServ software widely used in the industry.

“With every big technological change, there’s a big ‘change management’ exercise as well,” he says. “And that often is more complicated as you introduce people to new processes, new systems.”

In this case, Tomlinson believes the problem was implementing such major changes on a large scale all at once rather than taking a more gradual, phased approach and conducting testing along the way: “Maybe [the insurers] could have found a way to stage that rollout a little bit.”

Despite the challenges in implementation, Tomlinson is encouraged to see insurers pursuing new, innovative ways of doing business.

“It was a laudable effort to make changes and move their business – and the whole industry – forward,” he says. “It’s a shame that with such good motives, something can cause so much pain for an organization. But, I still think it’s better to have the courage to try and make a change than to do nothing at all.”

© 2015 Investment Executive. All rights reserved.