Life Insurance Underwriting! Art, Science Or WAG?

Since the ING Reliastar cholesterol ratio bell curve debacle 3 years ago I’ve been given to musing about what really goes on behind the closed doors or a life insurance underwriter’s office. Are they in there pouring through records and giving credits and debits to applicants based on their actual documented health or are they throwing darts at a board that has all the possible underwriting outcomes from preferred plus to table ratings, flat extras, postpones and declines. Once they count that dart they turn and throw at another one that has options of, “based on labs”, “due to information in medical records”, “due to confidential information from medical records” and my favorite, “based on confidential information from an undisclosed source”.

I know some underwriters personally and they assure me that, while there are some scary underwriting practices out there, they aren’t the guilty ones. Like they would admit it, right? But I am picky about my companies and with that decision I am really picking a company with the kind of underwriting practices that give me clients the best chance at success. Does it all come back to the right agent using the right company because they have the right life insurance underwriting practices or is it more mysterious, such as a combination of art and WAG (wild ass guess)? Bait and switch falls into something even more shallow than WAG since there is really no attempt to guess. And this is really agents (wrong agents), not underwriters. Brain tumor? Preferred plus. Liver failure? Preferred plus. Six DUI’s? Preferred plus. See how easy that is. The hard part is to explain the aftermath of the actual underwriting. Decline, decline, decline!

But back to underwriting and what I personally look for in company philosophy and underwriting. Understand that all companies have underwriting manuals (probably computers) and for any given impairment the manual gives the underwriter a guideline. I try to avoid companies and underwriters that think guidelines are rules. When they go down that road then there isn’t any room to credit someone for doing all of the right things leaving them on equal ground with someone who really isn’t managing their impairment well. It doesn’t make sense to give the same life insurance rate approval to a diabetic who closely monitors their glucose and is consistent with treatment and checkups that you would give to someone who takes their Glucophage when they’re feeling diabetic and only go to the doctor when they need a prescription refill.

Even in the core group of life insurance companies who stand apart as the best of impaired risk companies there are huge differences of opinion on individual impairments. If an agent is too quick to send a life insurance application to their favorite company you might find yourself declined when a preferred rate was available through another company. That’s why I shop virtually every case I work. I’ve got some favorite underwriters but they know I will go with the best quote based on the facts of the case as long as the company I get it from has a track record of sticking to their trial quotes. I sometimes lose business because I insist on customers doing life insurance homework before I shop. I know, for instance, that the underwriter will want to know exactly what lab results are or exactly what a pathology report or stress test reveals. Shopping without the facts would be like shopping with an expired credit card. You go through the whole process of looking and trying something on and falling in love with it only to find out you lose it at the check out stand.

Bottom line. Life insurance underwriting, done correctly, is probably professionally on a level with a CPA. They could just take the numbers and ram it all through en mass without looking for the credits, but they don’t. They look for ways to save you money within the legal guidelines they have to follow, but all clients are not created equal. If you have questions about life insurance underwriting or how to find someone who will look at your situation from a fresh angle, call or email me directly. My name is Ed Hinerman. Let’s talk.