Well, this is awkward: Your client agreed that he needed additional life insurance. You submitted the application, and then your client learned that he won't qualify for preferred rates, which was the amount that fit his budget. Instead he's been rated as a higher risk, and the annual premiums are much higher than you two had discussed. The client understands that it's not your fault. But you're still concerned the incident has strained the relationship.
"People take personal offense to ratings, or worse yet, declinations, because they feel like it's almost an attack on their person," says Kevin Meehan, CFP, ChFC, with Wealth Enhancement Group in Itasca, Illinois. But, the reality is that many clients develop health conditions as they age that negatively affect their status as life insurance applicants.
How can you decrease the likelihood that an underwriter will penalize your client? It's possible to do this by providing the additional details required to help that underwriter make a better informed decision.
Conduct more focused interviews
Meehan's firm has clients complete a standardized form requesting health details before they approach any of the life insurance brokers with whom they work.
Similarly, Million Dollar Round Table member Brendan Walsh with Catalyst Solutions Group in Birmingham, Michigan, starts by asking higher-level health-related questions: date of birth, tobacco usage, any health issues in the past five years that might be a red flag for underwriters? These questions give him an initial sense of any potential problems. "We're going to do some pre-underwriting," he says, "to see if we might be running into any issues in the underwriting process or if there's anything for which we need to prepare in advance."
If a potential underwriting concern comes up, Walsh digs deeper. He cites a fairly common example of skin cancer. In those cases, he'll ask about the diagnosis dates, treatments, any medications, how long since the client has been out of treatment, and so on.
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An informal, "pre-underwriting" survey can help decrease the likelihood that an underwriter will penalize your client. (Photo: iStock)
Informal inquiries
Using that information, Walsh can call an underwriter at a carrier with whom he has a good relationship to get their informal opinion on the case's underwriting challenges. He frequently also suggests to clients that they approach prospective insurers through an informal inquiry.
"We'll fill out an informal inquiry questionnaire," he explains. "We can then disseminate (the questionnaire) to a number of different carriers so that we can get some firmer ideas of how they might be underwritten before we even actually go through a blood and urine sample and complete formal underwriting."
Walsh has found that clients and prospects, especially those with any history of health problems, appreciate this approach versus moving directly to a formal application. These applicants are often apprehensive about the process, he says.
"I think it really helps assuage some of those concerns because it's soft underwriting without actually going in and getting a hard decline or a hard rating from a carrier," says Walsh. "We can get a good sense of what we're going to see and how carriers might treat that."
Mitchell Kraus, CFP, CLU with Capital Intelligence Associates in Santa Monica, California, also drills down before submitting a formal application. If he spots a problem, he then contacts different insurers to learn how they would handle the application.
