To say that the nature, the underwriting and the life insurance products have changed and changed remarkably over the last 10 years is an understatement. There is the old world of life insurance and now we are really, truly living in a new world and customers, both business and personal life insurance owners, are reaping the benefits.
It seems the biggest change is that more life insurance companies are underwriting individuals on their own merit (clinical underwriting) as opposed to the bucket underwriting of the past where all clients with the same impairment were offered the same rate. The idea of bucket underwriting is unfair to the core because it doesn’t reward someone who, for instance, has type 1 diabetes and is compliant with their doctors orders to the letter and has made lifestyle changes and has great control of their condition. That is key with diabetes as non compliance and no lifestyle changes leads to swings in glucose and A1c’s which ultimately leads to collateral health issues, primarily coronary artery disease. To have someone punished for well controlled diabetes and essentially rewarding someone with uncontrolled diabetes doesn’t make sense and life insurance underwriters are embracing this.
Clinical underwriting has finally opened the door (for real) to those who have well controlled HIV positive status. 10 years ago we could all hear mumbling about the possibility of business and personal life insurance for HIV+, but when presented with a real live application, the companies that were mumbling were quick to say no and just as quick to blame it one reinsurance companies. I wrote my first successful business life insurance for a HIV+ CEO five years ago through Lloyds of London and since have written as much as $9 million on one person through a traditional carrier. I expect the prices to come down over the next five years, but for now it doesn’t come in small amounts and while priced fairly, it isn’t something that a low income person could likely budget. The approval criteria are tight and they should be. Another big breakthrough followed the medical news of the decade, a cure for Hep C. Remember that clinical underwriting treats each person as presented so cured Hep C with no liver damage can garner better than standard life insurance rates while Hep C with moderate liver damage would pay more and if the liver damage was at the cirrhosis level it would be declined. The cure through Harvoni and other similar drugs has made real life insurance underwriting news because it stops the progression of liver damage.
At the product level there has been a big change that has flown under the radar in spite of huge implications. I have long touted the no lapse guarantee universal life insurance as the permanent product with more bang for less money than anything that had ever been offered. I also made much of the fact that it was too fairly priced to be a product that was like going to have a long life in the market place. I screamed as loud as my blog can stand and while many listened, most became enamored by a new product that was meant to take the light off of NLGUL and shine that light on a product that was grotesquely profitable to life insurances companies, Indexed universal life, IUL. Even though I could profit greatly from selling IUL, let me tell you what I know. Even though the stock market has rebounded from the 2008 collapse to the tune of 200%+, the low interest environment has kept this product in the basement. If it were half as good as the life insurance agents who sell it say it will be, it would be front page Wall St Journal news. All you’ve heard from WSJ is what a bust IUL is. So listen up, there are still a few great bargains for no lapse guarantee UL out there, but most are gone and soon they all will be. You snooze, you lose.
Bottom line. The best news of the last 10 years in life insurance is good underwriting getting better. The worst news is that life insurance still covets high profit over good profit. They are still willing to tell it like they want you to believe it might be instead of focusing on guaranteed results. If you have questions or would like to get quotes please call or email me directly. My name is Ed Hinerman. Let’s talk.