Archive for February, 2010
I’m always on the hunt for innovative underwriting. I like to find those nuggets when a company finally has an “aha” moment and decides that, for instance, maybe there’s some slack that can be applied to family history without risking the risk pool.
So today I get an email from Nationwide Insurance Company providing a lesson on the coronary artery disease world according to them. If offers up two proposed insureds with completely different backgrounds, their commonality being they are both 58 and both had a one vessel angioplasty with a stent two years ago.
From these two specimens I, as an experienced life insurance professional, am supposed to choose “Who receives the better rating?”
Insured #1:
* Male, age 58, 5’10”, 170 lbs.
* No previous medical history
* Exercises 5 days per week, healthy diet
* Non tobacco, rare alcohol consumption
* Father died at 55 of MI
Insured #2:
* Male, age 58, 5’10”, 250 lbs.
* No previous medical history
* Sedentary lifestyle, diet includes fast food and pizza
* Tobacco, regular alcohol consumption
* Negative family history
OK, knowing that I am going to be wrong according to Nationwide for someone as yet unknown reason, I’m going with the healthy guy. True enough he does have a family history of heart disease and has it himself, but I can’t help myself when you stand him next to a fat guy that smokes, drinks regularly, doesn’t exercise and eats junk food.
Dang. Knew I was going to be wrong. According to Nationwide #2 wins because he has more areas he can improve in. “Insured #2 could receive a more aggressive underwriting decision because he has the potential to modify his risk factors. Insured #1 already had a healthy lifestyle and his only risk factor was his family history. If we have documentation that Insured #2 is active and consistent with eliminating his risk factors, he may be able to obtain a better offer.”
Do you have any idea how long it will take #2 to eliminate his risk factors?
First, let’s deal with reality. #1 should have no problem being approved right now at a standard non smoker table 2 rate. For $500,000 of 15 year term that would run about $4300 annually. FYI. I have no idea what Nationwide would do to the guy. My rate is based on shopping it.
#2 today could at best be approved as a standard smoker table 4 and that would be a stroke of luck. At table 4 the same policy today would be around $14,500 a year. So, he quits smoking and starts on a diet and exercise program. A year from now he will be a non smoker but will still be very close to his smoking history and even if he tries hard he will be overweight. Best case a year older and now a standard non smoker table 4, about $6200 a year.
A year later he might finally get all his demons out of the picture and at his now age 60 qualify for standard non smoker table 2, about $5400 a year. Now that time line and those events are the absolute best case scenario. That is assuming this guy immediately quits smoking, stops drinking too much, goes on a diet and starts exercising and doesn’t let up until he is essentially the mirror image of #1. In my experience, even after a cardiac scare, about 25% of men would actually follow through that quickly and methodically.
Bottom line. I think whoever wrote that email at Nationwide really worked for another company and wanted to mess with their underwriting department. #1, in spite of the family history, should and would receive the best underwriting and #2 would never be able to catch up to the rates that #1 would receive. Never!
February 26th, 2010
So you just got declined for life insurance and you’ve decided that life insurance companies suck. The truth is you may have just had a goose lay a golden egg for you.
So, the good news in a decline? It almost always means that you either had the wrong agent or the wrong company, or both and you now know why you were declined. OK, I know you’re waiting for the good news. The good news is that if you know why you were declined and you take that information to the right agent who takes it to the right company, you will more than likely get approved.
If I’m you, the first question that comes to mind is how do I find the right agent? Well, I wish I could tell you it was as simple as going to www.rightagent.com, but alas, it’s a real estate agent site. So, narrow down what you’re searching for, and fire up the search engines. Don’t get sidetracked by agencies that are obviously using every key word they can just to attract attention. Look for links to agency blogs that actually show that there is some knowledge of your particular health issue and some expertise in being able to find good rates.
Then interview them. Call and ask questions. You know your health issue. Find out if they know it too. Do they ask you questions about your health issue that make sense? Do they seem to be digging for relevant information? Can they explain to you why the information they need is relevant to a life insurance underwriter?
When you feel like you’ve found a knowledgeable independent agent, lay it all out for them. Tell them you’ve been declined and by what company or companies. Tell them about the interactions you had with the agent or agents that worked on your declined applications. Tell them everything you know about your health issue and if they ask you to call your doctor for copies of tests or more information, do it for them.
Does it have to be an independent agent? I think not using an agent that has the freedom to go to the best company for your situation is foolish. You want an agent that has absolutely no allegiance to any company. You don’t want an agent who is trying to rack up points with a certain company to win a production prize. Their only focus should be who will approve you and give you the best deal.
Bottom line. Most people who contact us do it when they’ve been declined. I have this vision of someone being declined, for instance, for bipolar disorder and angrily typing into Google “bipolar life insurance”. Call up Ed Hinerman and see if he really knows anything about how to get life insurance if you have bipolar disorder. If not, go to the next.
February 24th, 2010
Aircraft Owners and Pilots Association (AOPA) has held themselves out as the private pilot’s friend for a long time, the advocate, the go to organization, the one stop shop for all of your needs.
For all I know they may in fact be the shining star they claim to be, except when it comes to life insurance where they stand out as being very limited in scope for the average pilot and amazingly like AARP, my least favorite advocacy group, in their other offerings.
From the life insurance information page of their website they throw out these offerings:
AOPA Group Term Life Insurance
Most likely you have some life insurance coverage. But is it enough to adequately provide for your loved ones if you’re no longer there to support them? Right now, AOPA members and their spouses under age 65 can apply for $5000 up to $1 million in affordable coverage with no aviation exclusions. Go ahead and get your quotes, but I’m not getting a warm, fuzzy feeling about a group product with face amounts available from $5000 to $1mm. Being group with super small face amounts it almost certainly has to be a simplified issue product and the way companies make it simple to issue is by overcharging or not guaranteeing. And what’s with only offering it up to age 65?
AOPA Level Term Life Insurance
AOPA members and their spouses can lock in affordable rates and benefits from $200,000 up to $1 million for 10 or 20 years. Every year you can trust that your rate won’t increase, making it easy to plan and budget from year to year. This is their Minnesota Life offering which, by the way, can be purchased through any independent agent. And when you go through an independent agent Minnesota Life opens up the offerings to include all the term lengths, 10, 15, 20 or 30 years, and face amounts from $100,000 to $10,000,000.
AOPA Senior Term Life Insurance
Often times obtaining quality, affordable coverage after age 50 is difficult. That’s not the case with AOPA Senior Term Life Insurance. It’s specifically designed for members over age 50. AOPA Members age 50 to under 75 and their spouses age 45-75 can obtain $10,000 to $50,000 in economical life insurance without submitting to a medical exam. This is the product that stinks like they robbed right off an AARP truck. Guaranteed issue whole life. Viciously overpriced permanent coverage that, because of the high cost, will rarely be still in force at the time of your death unless you can manage to die early on as a “senior”, say at age 50. Guaranteed a bad deal even if you’re just looking for a final expense policy.
Bottom line. AOPA is pathetically far down on the list of places that a private pilot should go looking for their best options on life insurance. There are plenty of independent agents out there that can get better deals in almost every circumstance.
February 24th, 2010
It’s probably been close to a year since I first mentioned the United of Omaha (Mutual of Omaha) lifestyle crediting program for life insurance underwriting called the Fit test.
The Fit test provides the underwriter plenty of ammunition to approve a policy at better rates than the underwriting guidelines might otherwise lead to. This has been done plenty in the past with permanent life insurance. Sales incentive “table shaving” programs have been around for a long time on universal life products where the premiums are high and it’s easier to knock off a few rate classes and still have plenty of money coming in to cover the risk. Where United really stepped out was offering this on term insurance and being bold enough to spell out the criteria that earn the credit.
Today we got an approval on a client with bipolar disorder. This wasn’t an easy case. The best tentative offer we got when we shopped it was United of Omaha at table 4. For those that don’t understand what table ratings mean, rates classes go preferred plus, preferred, standard plus, standard. After standard a policy is table rated. Each table with most companies is equal to 25% of the standard rate. So, if a policy at standard has a cost of $1000 a year, a table 4 would be $2000 a year.
United of Omaha’s Fit test allows for a credit of up to 2 tables, 3 in a few instances. In the case I described above, approved at table 4 it received a 2 table credit. To put that in perspective as far as what that can mean for the customers, they now have the option of paying 25% less for the 20 year term they wanted or the possibility of now going to a 30 year term for not much more than they originally budgeted for 20. It’s good stuff.
Bottom line. When United of Omaha first announced this program we all viewed it through slightly jaded eyes. It looked like a great opportunity but table shave programs in the past had often turned into bait and switch games by the company. But a year later I am ready to say that United of Omaha is the real deal. They have great underwriting and the Fit credits really do provide an underwriting emphasis on a healthy lifestyle.
February 23rd, 2010
Using a LIMRA study of a few years ago, at that point there were tens of millions of Americans that would fit into a category of “needing” life insurance, but didn’t have any. I know I’ve been down this road before, but is there really a case to be made by those millions of people, a good case, for not having life insurance protection for their families?
Just a few facts from that 2008 study kind of paint the picture.
Many U.S. families are not prepared for an untimely death
* Fifteen percent of husbands and 28 percent of wives have no life insurance.
* 6 million households (ten percent of families with children under 18) have no life insurance.
* The percentage of families with dependent children that admit they’ll have immediate trouble with everyday living expenses is 22 percent. Another 26 percent say that if a primary wage earner dies they’ll only be able to cover expenses for a few months.
So, 48% of families are either uninsured or grossly under insured if they are going to be in immediate or imminent financial trouble if the primary wage earner died. That’s half of the families with dependent children! That is just crazy. Oops. Kind of tipped my hand on where I stand on this question.
While the LIMRA study didn’t break it out by the age of those that were uninsured or under insured, I would venture a guess that most are in their 20’s or 30’s, those years of immortality when the idea of budgeting $20-$30 a month, every single month, for life insurance is like, well, it’s like acting just a little too grown up. What if they need that money to go out to dinner, or buy beer for the super bowl?
Maybe that’s a bit harsh. Truth is that in too many cases money is just tight for young families with children. But if that’s the case and that’s really the only reason you’re not doing the right thing, ask your parents for help. My children have life insurance because I pay for it. As a parent and grandparent, if you really think it through, there is a lot to be said for carrying a term insurance policy during that period when your children have dependent children.
There has been plenty made about how medical bills can bankrupt a family. How about when those medical bills end in the death of a family bread winner? With life insurance bankruptcy is taken out of the picture, as is the stress of the financial meltdown that can occur upon that death.
Bottom line. For me it comes down to this. If you’re old enough to have kids or old enough to be married; if you are old enough to have responsibilities that would impact someone else upon your death, you should have life insurance. No excuses. If you can’t afford it, get your parents or grandparents to help you. If you’re just blowing it off, get a friend to slap you in the face and wake you up. It’s time. Not later. Now!
February 23rd, 2010
Just when you think you can count on the life insurance underwriting guidelines, Glaxo SmithKline’s Avandia, becomes a curve ball that no one is sure how to handle.
Two US Senators released a confidential study that insinuates a strong link between Avandia and the occurrence of heart attacks.
While I’m not going to weigh in on the facts as the feds and the drug companies flail away on this one, I do want to bring up the kind of quandary this throws into life insurance underwriting and type 2 diabetes. Let’s say, for instance, that a person is shopping for life insurance. They have everything going for them. Late onset diabetes at age 55. A1c’s that are always 6.5 or under. No other risk factors like obesity or heart disease.
This person is going to get standard, possibly standard plus rates. But, from an underwriting standpoint, what if they way they’ve achieved the great control they have is with Avandia. What if they’ve controlled their diabetes but are at a greater risk of a heart attack due to the drug they are taking.
Well, the good news for the person wanting insurance, at least for now is that life insurance underwriters try to base most of their decisions on mortality studies. While I have heard some pretty big numbers being thrown around as far as the heart attack related deaths being attributed to Avandia, no measurable mortality risk has been attributed to the use of the drug.
Having said that, you can bet if there is a ban on Avandia, all bets will be off from an underwriting point of view.
Bottom line. Fortunately, life insurance underwriting is not real prone to knee jerk reactions to studies. For now at least, Avanida use, given good control, would get the same treatment as any other drug used for type 2 diabetes.
February 22nd, 2010
I know for me that I consider daylight savings time to be a personal attack on my well being, and now there are studies to back it up.
There has always been an acknowledged link between sleep deprivation and heart attacks, so it really wasn’t rocket science when someone figured out that the onset of daylight savings time each spring caused a several day spike in heart attack incidents.
I suspect if I suffered a heart attack around the onset of daylight savings it would be more out of pent up anger than sleep deprivation, but that’s just my personal whine over the whole subject.
But buried in this whole idea is a life insurance underwriting issue, and a health issue worthy of discussion. Sleep deprivation is obviously caused by more things than daylight savings time. Stress and anxiety are huge players in sleep deprivation as is sleep apnea which interrupts sleep frequently on a nightly basis. While there is no question on a life insurance application about how much sleep a person gets on average, there are questions that cover most of the normal reasons for sleeplessness, such as history of sleep disorders, chronic pain, stress, heart disease, depression, or arthritis.
There is even the vicious cycle of sleep deprivation leading to obesity that leads to sleep apnea which leads to more sleep deprivation. Yikes!
Of course what life insurance underwriters look at are the individual health issues and try not to make leaps of assumption like, bad night’s sleep equals heart attack equals decline.
Bottom line. What it does bring to light is the interconnection between one health issue and another. Things like getting a good night’s sleep can’t be poo-pahed away as unimportant.
February 19th, 2010
Life insurance is not underwritten based on your take on your health or your mental state. If it was the case, everyone would be approved at preferred plus.
We have built a very good reputation over the years for being able to turn declined life insurance applications into approvals. A lot of times the reason for the decline is an obvious error on the part of the client. For instance, say they had bipolar disorder and decided to get their life insurance from their Farm Bureau agent. After all, he didn’t seem to have any problem insuring your car or your home, right?
In those cases, many times, it really is just a matter of getting all of the facts according to the client, presenting it to a large number of companies, going with the best offer and presenting an approved policy.
But sometimes when you listening to the story about the decline, things just sound a little out of whack. It’s in those cases that I will often ask the client to supply a copy of the records that seem to have been the primary cause of the decline. That’s the best way to cut right to the meat of issue and determine what we need to be presenting to underwriters.
Let’s use bipolar disorder to make a point. If a person with bipolar applies for life insurance and they kind of skirt the issue by saying they’ve had, for instance, a few bouts of depression in the past, the application will get declined. If they admit bipolar disorder but paint a perfect, glowing account of a life free from bipolar symptoms, but their records paint a different picture riddled with manic trips to the ER or depression so crushing that they are on disability because they can’t deal with the world, it’s a decline.
If, on the other hand, a pre-review of the records gets all of the skeletons out of the closet and those are all divulged informally in a trial process with multiple underwriters, there is a very good chance that there will be an approval. There will still be plenty of underwriters that will say no thanks, but they won’t get the formal application.
I’ve used the following criteria in several posts about bipolar underwriting and the criteria is listed on our bipolar specific website. Based on this post and an interview I did with a prospective client today I am adding a few addenda (bold faced).
1. Someone who has not been hospitalized for bipolar disorder other than for diagnosis? This includes ER visits and outpatient programs.
2. Someone who has not attempted suicide or had bouts with suicidal ideations?
3. Someone who is compliant with their treatment, both medications and regular followups?
4. Someone who is leading a verifiable stable family life or social life?
5. Someone who is exhibiting a verifiable stable work life?
6. Someone who is not on disability for bipolar and does not have issues with drinking or drugs? If there’s a problem here, then the answers to 3, 4 and 5 are no.
Bottom line. Within given parameters there are good rates to be had for life insurance even if you have bipolar disorder. The first step is to give it all up for the sake of accuracy and full disclosure. It may not feel good, but the result will.
February 18th, 2010
I get one of these calls every month or so. A client can’t remember where they put their life insurance policy. It’s not a huge deal to fix the problem, or at least to get a new policy.
The larger problem is that if you can’t find your life insurance policy, how much information does your beneficiary have to work with if you died suddenly? Do they know you have life insurance? Do they know what company it’s with or who your agent was? Filing a claim without a policy isn’t a big deal. Filing a claim is virtually impossible if you don’t know who the agent or the company is.
So, let’s talk about the proactive approach to this issue. When you take out a life insurance policy, talk to your spouse about it. Let them know how much the policy is for, what company it is with and either show them where you intend to file it, or let them file it. Also make sure they have a business card for your agent. While they can file a claim without contacting an agent, a good agent is going to make things go quicker and smoother for them.
Another reason they should know everything about the policy is, say, you had a stroke and were incapacitated. Premiums need to be paid to keep your policy in force and in the absence of your bill paying ability you will want your spouse to make sure everything stays in active.
Ok, so what are your options as a surviving beneficiary if you believe there was life insurance in force, but you don’t have a clue who the agent or company was? Hands down the best option is through the MIB, Medical Information Bureau, a company that tracks medical information in virtually all life insurance policies applied for in the US. While their main focus is fraud prevention, making sure pertinent health information isn’t somehow left off of a second application, an offshoot of that is a database that includes most, if not all, life insurance applications. The MIB has approximately a 14 year database of over 170 million applications. Good chance you can find what you’re looking for.
Bottom line. You should be talking to your beneficiary about insurance policies anyway. It’s kind of a stupid secret to keep. So, have that talk. Tell them what you did, who it was done through and what they should do if you don’t wake up.
February 17th, 2010
I’m often asked when a policy is declined or highly rated, if it would make a difference if we lowered the face amount of the insurance. In the mind of the consumer is the not so crazy thought that if the life insurance company is exposing itself to less risk (death benefit), so they might be able to kind of look the other way on the perceived increased risk (the health issue).
Makes sense to me, but in real life that’s not the way life insurance underwriters look at it. The perceived risk they care about is mortality risk or mortality experience, not the amount of the death benefit. The only difference they apply in underwriting say, $100,000 or $25,000,000, is what are called underwriting requirements. The underwriting guidelines are exactly the same for both amounts.
Underwriting requirements are the tests that a person needs to endure. With most life insurance it is a standard paramedical exam that consists of blood and urine specimens, a check of height, weight and blood pressure and a review of medical history. As the amount of insurance increases things like ekg’s, stress tests, exams done by doctors rather than paramedical practitioners, chest x rays and so on can be added.
But the underwriting guidelines stay the same. If a company guideline calls for a total cholesterol no greater than 220 for their best rate class, it needs to be no greater than 220 no matter how much insurance is involved. If the family history guideline says no parent shall have died prior to age 60 of a heart attack to get the best rate, they don’t cut slack if you lower the amount of insurance.
Will they do more testing if you want $25 million? Count on it. Will they have several people review your medical records just to make sure they didn’t miss anything? They’d be crazy not to. But when it comes to guidelines and defining healthy the playing field is level.
Bottom line. The answer to the question is no. Lowering the amount of insurance you apply for is not going to somehow allow you to fly below the radar, or make for softer guidelines. Apply for what you need and make sure you divulge any health issues to your independent agent up front so they can steer you to the right company for the best result.
February 16th, 2010
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