Have Technology killed good faith?
You are at the mall, looking for a comfy massage chair.
The petite, sweet-looking sales girl has convinced you to get one from her.
She brings you to the counter.
The grim-faced manager greets you and starts to question you in a brusque manner.
“How much do you weigh?”
“Have you had any massage chair before?”
“Do you smoke?”
If you refuse to answer, he will not provide you with any warranty.
And should you be found lying, you may have to return the chair.
Would you still buy it?
We bet you wouldn’t.
And we will definitely do the same too.
But when it comes to insurance, that is exactly how business is conducted.
Just because of this concept.
Utmost Good Faith.
What is Utmost Good Faith?
In a usual transaction between any buyer and seller, caveat emptor (buyer beware) is applicable.
It means that as a buyer, you are responsible for checking for the quality of the product.
If the good turns out defective, good luck to you.
It is not so with insurance.
This is where Utmost Good Faith (UGF) comes into the picture.
The seller of the good (insurer) is making you responsible for disclosing all material facts about yourself.
You must declare to the insurer every piece of information that may influence their decision on whether to accept the business or how to price the policy.
Do you have an existing medical condition?
Rejected by any other insurance companies before?
Are you living in Yishun (j/k)?
It seems unfair.
However, it is necessary.
However, the insurance companies must know them so as to decide if they should undertake the risk.
An insurance company is a business.
And businesses do not take on bad risks or they will no longer be one.
They have to know whether you are a good risk.
And the only person privy to such personal information?
At least that was true in the past.
The problem with UGF
The insurance companies underwrite policies on basis of probability.
Aged 45? This is the chances of you dying this year.
Driving a red Porsche means that you are more likely to speed and get into an accident.
But these are based on standard risk.
If you are exceptional, the risk changes.
And if it is to the disadvantage to the insurer, they want to know it.
You are compelled to disclose due to UGF
This is an onerous duty.
How do you know whether what an underwriter wants to know?
Should you know, you should be taking his or her job already.
In essence, the biggest problem with UGF is that it create a duty on the policy-holders.
And the customers have little idea how they may discharge this responsibility.
Has technology made UGF obsolete?
It is a responsibility that insurers are capable of undertaking now.
Due to technological advancement, insurance companies are able to get all sort of data about you.
And they are able to process all of them due to the same reason.
Since they are the one who decides which are material facts, they should be taking responsibility for verifying them.
Need to know your pre-existing condition?
Get your written approval and the hospital may oblige at little cost.
It is easy to retrieve your medical records nowadays.
Want to know you a little better.
Your social media may offer them a glimpse.
Skydiving photographs on your Instagram or your check-in at MBS may provide a picture of your lifestyle.
In fact, an insurance firm Admiral Insurance wishes to set the price of your insurance premium by looking at your Facebook posts.
It is able to analyse your personality through your social media.
Thankfully, its plan is thwarted by Facebook on the grounds of privacy concerns.
Melina applied for liability insurance to be added onto their homeowner policy.
However, it was rejected.
Because her Facebook account revealed that she was indeed rearing a dangerous breed of dog that she failed to declare.
Now, a selfie can help the insurers determine whether you qualify for life insurance.
And how much it will cost.
The alternative to UGF
With the technological edge that insurance companies have over commoners like us, we wonder if there is any reason for maintaining UGF.
After all, they have many ways to get access to our data.
Insurers can always bribe us into surrendering our personal information.
By offering some discounts, the insurance companies entice us to give up our data voluntarily.
And it has already started.
Insurance companies are able to right-size their home policies by wiring smart devices into your home.
By gathering the data, they can not only calculate your premium accurately but also mitigate losses by early detection of leaky pipes.
Not only that, wearable wristbands can be an insight into your health condition, making it impossible for you to hide your medical conditions.
Closer to home, Telematics is able to provide the insurers on how you drive.
NTUC Income has offered discounts if you allow them to track your driving habits and mileage.
Interested? Read all about it here.
Technology has evened up the information asymmetry.
It seems excessive to have UGF to protect the insurers.
Technology may necessitate UGF too.
On the hand, technology is quickening the process of underwriting.
Ladder Life is an Insurtech that can get your life insurance approval within minutes.
It is a game changer.
To get a policy from Ladder Life, you just have to fill up a questionnaire.
Ladder Life underwrites it and sends a medical doctor your way if it is required.
Otherwise, it will tell you if you are qualified to be insured.
The high-speed approval of policies does need complete honesty in order for it to work.
That is UGF working its magic.
That is UGF helping technology to improve the insurance industry.
The future: UGF in lesser dosage.
The answer to the central question may just be that.
Insurance companies still require UGF to make insurance policies work the way it should be.
But it is only needed for the most basic data such as your height and weight.
For everything else, the insurance companies can buy it off you.
Click a button to share your Facebook wall with your insurer.
Take a selfie and send it for underwriting approval.
And you enjoy a fine discount along with that.
So what do you think is the future of UGF?
Does it stand a chance against the prying eyes of technology.
Share with us your thoughts.
www.ClearlySurely.com aims to eradicate the knowledge gap between consumers and Life Insurance. Our Vision is that one day, every Man, Woman, and Child will be properly insured.
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