Life insurance underwriters at carriers look at a long list of factors. Those factors include personal health history, family health history, driving record, prescription, medical records, and MIB (Medical Information Bureau). MIB tracks application history at other carriers. Making healthy lifestyle changes produces a significant difference in an individual’s policy rate classification for life insurance. The underwriting process can be incredibly challenging at times, especially these days. People are living longer; however, they are not necessarily as healthy due to their lifestyle habits. The good news is that many health risks are manageable and are improved by simply making healthy lifestyle changes.
How does the life insurance underwriting process work?
To understand these variables in underwriting, we must first understand the underwriting process itself. When a client completes an application, they begin the underwriting process. The carrier case manager collects motor vehicle reports, prescription history, MIB records, paramed exams, and other requested information like medical records. Then, the carrier case manager sends that information from the application to the underwriter. This underwriter is extensively trained. They assess an application and determine the health risk of the client. They also create an offer on behalf of the carrier. That offer will then determine the final rate the client would pay for their coverage.
What factors lead to higher life insurance rates?
Higher life insurance rates can be associated with lifestyle choices that often are avoidable. Such examples are scuba diving or having a private pilot license. The riskier the lifestyle choices, the higher the rate is. It is possible to predict rates before completing an application. Know the risks of the client and match the best carrier for them. The insurance advisor plays a crucial role in the underwriting process. It is vitally important that the advisor asks the prospect specific questions about risky lifestyle behaviors as well as health history. These questions help to determine on a tentative basis which carrier may be the most suitable.
What are life insurance classifications?
Life insurance classifications are a part of the underwriting process used by insurers to determine premium amounts. Carriers use four classifications:
- Preferred Plus: Best health class.
- Preferred: Good health class with little to no health concerns.
- Standard plus: Good health and slightly better than standard height and weight range.
- Standard: Average health and good height and weight ranges.
- Rated Cases: Table ratings are multiples of premium based on various individual factors of personal history.
Many carriers will have categories exclusively for those who identify as smokers. The tobacco status is one thing that the advisor routinely knows to ask.
What can agents do to get better life insurance quotes?
Brokerage General Agencies assist and streamline the life insurance quoting process to produce more accurate quotes. Obtaining necessary personal information from a client upfront allows the BGA to review the case and provide a well-assessed estimate of possible rates.
When working with an agent, a BGA will:
- Review smoking status.
- Review build, height, and weight.
- Review any medications currently being taken.
- Discuss any health concerns past and present.
- Ask specific lifestyle questions. These may include any engagement in risky behaviors, such as a poor driving record or dangerous sports.
- Discuss family medical history. The underwriters are required to take family history into account. Some impairments are genetic, such as cardiovascular disease.
Often, when asking these questions to an agent, the producer answers, I do not know, I did not ask, but they look preferred, so just run with that. Remember, just because someone looks healthy on the outside does not mean they are healthy internally.
Understandably, these are sensitive questions. The answers may be uncomfortable for the client. However, the insured needs to be open and honest with the producer upfront. The insurance company will find out about any issues once they perform their background checks. Dishonesty or non-disclosure can disrupt the underwriting process. There is nothing more frustrating than finding out about medical issues or reckless lifestyles once the application is already in the underwriting stages. The sale could derail due to an applicant not disclosing pertinent information to the producer from the beginning.
What are common health impairments seen in the life insurance underwriting process?
Type II diabetes, sleep apnea, and moderate asthma are health impairments regularly seen. Clients with these health impairments are offered favorable ratings when the insured is maintaining their condition well. Underwriters will ask the date of diagnosis. The shorter the duration, the better. They will ask about the current A1C level. Anyone who stays on top of this condition knows their number. Provided a prospect is in good health condition otherwise, with a standard build, no cardiac or kidney issues, no tobacco use, these impairments may not negatively impact a client rating.
Sleep apnea is also quite common. About eight months ago, there was a case for a 44-year-old male. He was a cigarette smoker seeking $2 million of term life insurance coverage. He was diagnosed with sleep apnea at the incredibly early age of 35. He also has slightly elevated blood pressure, for which he had not treated with any medication. His father died in his 50’s due to heart disease, so this gentleman is at risk for cardiac issues, as well. In addition, this individual scuba dives approximately 60 times per year, up to 100 feet. The underwriter approved him As Applied For which was Standard Tobacco status. The key to this approval was that he was compliant with his CPAP. He is maintaining his condition well. The wonderful thing about this was that the client was upfront about his conditions. Due to him being upfront, the recommended carrier gave him the rate as predicted. An additional touch was providing a cover letter with the application explaining his situation.
On a separate note, underwriters love cover letters. Cover letters can avoid back and forth questions by simply stating the purpose and need for the insurance coverage. This is especially important when it comes to justifying the amount of insurance requested. It makes the underwriter’s job a little bit easier.
Will a cancer diagnosis impact the underwriting rates when applying for life insurance?
Certain types of cancers, such as prostate cancer and breast cancer, often have good outcomes. There are several key questions to ask regarding cancer diagnoses. Those questions include:
What type of cancer was diagnosed?
What was the stage and grade of cancer?
What type of treatment was received?
Underwriters will ask if there was chemotherapy, radiation, surgery, or a combination of any of those three. The longer that time has gone by since the individual completed treatments or the necessary surgery with no re-occurrences, the better the offer. The main concern underwriters have regarding cancer is that it could reappear even in a different location than the first time.
Can underwriters be consulted about an offer?
Underwriters want to place cases in force. They are willing to work with an agent on hard cases, provided the applicant is accommodating as well. For instance, a Brokerage General Agency can call an underwriter to find the reason for a specific rate, postponement, or declination. Often, the proposed insured does not agree with the offer they may have received. On many occasions, it came down to a simple test that the applicant’s doctor recommended, and the individual never completed the test. An example missing test might be an EKG, ultrasound, sleep study, or colonoscopy. These are standard simple procedures to complete. Typically, the underwriter is willing to move forward with an application if the insured gets the recommended test performed. Cases initially postponed for months ended up approved as applied for when the applicant obtained needed procedures or documents for the underwriter.
Tips for obtaining a favorable underwriting offer.
It is essential to stress the importance of providing vital information from the beginning for a smooth outcome. It is recommended advisors complete a short, general health questionnaire that consists of less than ten questions to ask the prospect. Send the questionnaire back to EMG to allow the case for review. EMG will assess for the best carrier and rate available.
EMG Insurance Brokerage is here to help with all your insurance needs, and we welcome the opportunity to assist you with your next case.
Insurance and Financial Solutions Consultant/Sales Director
EMG Insurance Brokerage