We’ve had an ongoing dialog the past month or so about life insurance predictive models or methodologies and how the life insurance industry might embrace and use this new technology to both help clients get better rates and put a more solid floor in their bottom line. Simply put, if a methodology such as Exam One’s Risk IQ can add previously unknown knowledge to life insurance actuarial assumptions, knowledge that can help clients get better life insurance rates than they might have with just traditional underwriting, that’s a good thing. The company won’t make as much money on that case but they will be standing on a more solid mortality experience base than they were before.
The flip side of this equation is when the Risk IQ brings information to the table that would sway a decision toward a higher rate or rate class. This is, of course, not something that a customer is going to want to hear even though it might bring information to light that will be helpful in their ongoing quest to stay ahead of the health curve. Companies would benefit from this, not because of any additional premium dollars, but because measuring and balancing mortality assumptions is the key to success for the company and their customers. As much as you and I don’t want to be the balancers in that equation, it has to exist or the company won’t.
In talking with Ammon Dixon from ExamOne about this methodology he asked, as an agent, what kind of concerns I would have about a company using this type of advanced underwriting tool? It’s a no brainer that the first scenario isn’t going to present any problems at all. I have never and I don’t know of anyone who’s ever had a problem placing a case that comes back better than applied for. The way that would shake out is because my original quote would be based on medical history and medical questions coupled with tests such as pathology reports or previous labs that I was shown. When the insurance labs are done and the Risk IQ applied it could well paint a better mortality picture and allow the company to approve the life insurance at a better rate. And all the agents said, “Wow, we like this system.”
As we discussed the other side of the coin, the subject came up of whether the average life insurance agent out there would be able to explain and place a life insurance policy approved at a higher rate due to the Risk IQ. A lot of agents don’t know how to handle that conversation with their life insurance client. They have a tendency to over react, but if the facts are there to back up the decision it really is just a business decision. “Mr. Jones, your policy was approved at a higher rate than expected. Remember that the rate was based on your build and known medical history with the only wild card being the examination and lab work done by the insurance company. I’ll be sending you a copy of those labs, but for now let’s talk about the approval. Here’s the rate if we stick with the amount and term length you wanted. To keep this in the same price range we can lower the amount of coverage or go with a shorter term until you’ve had a chance to review the labs with your doctor.”
Agents not accustomed to impaired risk life insurance might have a problem initially with placing policies at a higher rate, but companies that take on this kind of valuable tool are very likely going to be saving enough money on the back end to invest in making their agents more professional at policy placement. From my perspective I believe the balance of the overall equation shows more positive conversation potential for agents with their applicants.
Bottom line: Even with the best of information going into an application there is always the possibility of things changing with new information on the labs and exam. It’s worth a company’s time and money to make sure even independent agents know how to walk through that surprise with the client. If you got a life insurance approval that was higher than expected, whether you’re the client or the agent, call or email me directly. My name is Ed Hinerman. Let’s talk and see if we can make sense of it all.