When talking with producers about why they don't write more disability income insurance, the most common thing I hear is that the application and underwriting process is too difficult. In all the years I have been in disability sales, I've never heard a producer say that their clients don't need income protection, or that the commissions are too low, or any of the other typical reasons that we assume producers aren't writing a particular product. So if we can agree that income protection is a key ingredient to a successful and sustainable financial plan, how do we make the process easier?
The golden nugget
Are you ready for the golden nugget that will help streamline the process? OK, here goes: field underwriting.
Really? That's it? That's the magic ingredient that will take individual disability sales from a headache to a breeze?
Yes. Disability insurance underwriting is different from life insurance underwriting. It's different from long term care insurance underwriting. You must discard all of your preconceived notions about how underwriting "should be," as DI underwriting is an entirely different animal. Disability insurance carriers are trying to gauge whether a client is likely to become disabled based on a myriad of factors — specifically age, occupation, and medical background.
- Age: Your clients' likelihood of becoming disabled actually decreases as they grow older, based purely on the number of working years they have left. So while a 45-year-old male has a 40 percent chance of becoming disabled before retirement age, a 30-year-old's chances are more than one in two. That being said, our health tends to decline as we get older, so despite the fact that we are less likely to become disabled overall, the risk of a disabling heath condition does increase.
- Occupation: Disability premiums are based partly on the risk associated with your clients' occupations. Two main components come into play here: the likelihood that clients will become disabled based on the physical aspects of their occupations and the individual carriers' claims history within the occupation – and, in certain instances, the industry's claims history as a whole.
- Medical information: Keep in mind that carriers are insuring against morbidity rather than mortality. Those who survive a disease, condition, or accident may very likely survive disabled. Conditions and incidents such as cancer, strokes, and heart attacks that were sure killers 20 years ago are now, more often than not, disabling conditions. These big three are somewhat easy to underwrite, but what is often overlooked is that carriers must also look at the common conditions that prevent people from working. These can include mental and nervous conditions, sleep conditions, gastrointestinal conditions, and musculoskeletal conditions, to name just a few. One of the biggest reasons we see declination of coverage or rated policies that go untaken is when producers or clients deem certain pieces of the applicant's medical history to be unimportant during the application process.
Your action plan
Considering all of this, what are the key things you should do when field underwriting? First and foremost, prepare your client with the information you will need in order to complete the application. In most cases, this should include:
- Financial documentation, whether it be tax returns or W2s
- Contact information for all physicians the client has seen in the last five to 10 years -potentially longer if there is a significant medical history beyond the times indicated
Once you have prepared the client, make sure you completely fill out the application for coverage. This includes all signatures, answers to financial questions, and complete contact information for all physicians the client has seen within the period indicated by the carrier. The application will become part of the contract, and as such, requires an amendment if not completed. Any portion left incomplete will need to be completed at some point, which will require you to call the client again.
Once you have filled out the personal and financial information for the client, you will generally have two options: completing the medical portion of the application, or completing a tele-app. If the carrier you are working with offers the tele-app in lieu of a completed medical questionnaire, you may want to consider that route for two reasons: It can cut down on underwriting time, and you can avoid asking your clients potentially difficult questions about their medical history, although it is important to prepare your clients for a tele-app interview.
If you do end up completing a medical questionnaire, make sure that you obtain the following information:
- All medications the client has taken within the last five years, and how long each was taken
- Dosage and reason for prescription on current medications, if any
- All medical conditions for which the client has seen a physician in the last five years and the dates of diagnosis and treatment
- Whether the client has seen or is seeing a chiropractor for any reason
- Whether the client has seen a counselor, psychologist, or psychiatrist within the last five years, for how long, and the reason for the visits
The more detail that you can provide, the less likely it is that the carrier will have to order attending physician statements, which is one of biggest reasons for underwriting delays.
Disability insurance is one of the most important parts of a client's financial plan. Don't let the process distract you from providing your clients with a crucial service. If you take the extra time, set good expectations up front, and follow the steps outlined above, you'll see that selling DI can become an important, income-generating component of your insurance or financial planning practice.
