'Open Invitation To Anti-Selection'
To The Editor:
I would like to respond to Maria Thompsons article of July 23 in which she argues that the key to success in the middle marketplace is speedy underwriting. I disagree with her premise that in this market, higher mortality costs will be more than offset by lower acquisition costs and higher placement rates.
The sort of token underwriting that she advocates is an open invitation to anti-selection. She asserts that faster and cheaper underwriting might allow insurers to "accept 4% of applicants at an average of 100% extra mortality."
I wonder how she arrived at these numbers; my own experience with underwriting in this marketplace suggests that probably 4% of applicants who would be offered standard coverage under the limited "instant issuance" underwriting she proposes would be found on further investigation to be entirely uninsurable.
I believe that insurers have an obligation to both existing and potential policyholders to underwrite responsibly. And fortunately for us humans who continue to toil in the new-business department, the automated model she proposes will remain economically non-viable as long as some companies continue to properly classify risk and charge accordingly.
Limited underwriting will always attract sicker applicants. Persistence in this group will be excellent but the better risks will sooner or later gravitate to cheaper policies where prudent underwriting offers fairer value to the consumer.
William Nowlan, MD
