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!