Impaired risk underwriting isn't what it used to be. Advances in medical technology, big data, and information sharing are transforming it from a 1970 Plymouth into tomorrow's Tesla.
These dramatic changes are ushering in new processes, fostering enhanced metrics, and paving the way for underwriting methods that are innovative, refreshing and far-reaching — both for clients and for advisors.
Enormous strides in medical technology are making available new and improved clinical testing, evaluation and diagnostics. Couple these striking enhancements with improved underwriting knowledge and understanding, and life insurance underwriters have the ability to make better offers.
Here is how these methodologies contribute to improvements in IR underwriting.
Prescription database: Using this database can help determine the reality of a client's medical status without ordering an attending physician statement (APS). This can be helpful when it's unlikely that an APS review will add significant additional information. Quite often an acceptable offer can be made when it seems that there is relative clarity in the client's medical status.
Big data: Information about a client's habits, lifestyle and status that may or may not add up to various risk factors is now instantly available. Access to this information can be invaluable for both simplified and full underwriting, as it provides information on the risk that was unavailable or difficult to access previously.
Interviews, the Internet, MIB and consumer files: Taken together, these four factors are critical underwriting components. Use of the Internet helps to ferret out lifestyle evidence that can contribute to making or breaking a case. MIB searches and personal interviews have long been used and are still essential components in building the client's file. Access to various other databases can provide the underwriter with information that was difficult or impossible to obtain previously. These information sources speed cases along and help to minimize underwriting requirements.
Various manuals: Historically, companies would use a single manual to assist in assessing a risk. Some larger life companies had proprietary manuals built for their use. Now, it's not unusual for companies to have two or three manuals. And several companies have four manuals for risk assessment. Using strengths from various manuals can make for very aggressive offers with competitive pricing, which can mean the difference in placing the case or not getting the business.
Up-to-date medical research and testing: There is an accelerating trend in the quality of diagnostic tools for underwriting such significant risks as cancer, heart disease and diabetes. These tools help clinicians and underwriters recognize and classify the medical issues faced by patients and proposed insureds. New medical and drug treatments are continuously coming online, and have accelerated the pace with which patients' health outlook, status and prognosis can improve. Carriers have removed requirements for echocardiograms, with many substantially reducing their requirements for an EKG, and substituting the NT-Pro BNP blood testing at certain ages. All of these factors have a positive effect on mortality and help the underwriter make better offers.
Personal habits: The outlook for improvements when dealing with personal habits remains a mixed bag.
Alcohol abuse: The position of life carriers regarding alcohol abuse is relatively unchanged. A mild or moderate abuser can secure a mild or moderate rating. Anything more severe typically will be rejected, requiring some years of sobriety and abstinence to obtain an offer. In addition to the use of the APS, driving records and interviews, there are multiple lab markers used to help in evaluating the applicant's usage.
Addiction and abuse of narcotics: Drug abuse has become more prevalent, and is challenging when making offers. Offers are made, but the compliance and control are necessary.
All in all, more insurance companies are improving their rate classifications for a variety of risks. (Photo: iStock)
