You just got back to your office after having your third meeting with one of your best clients. This 60-year-old executive is finally going to go ahead with the estate planning you've been recommending for the past few years. He is married to his second wife and wants to leave the bulk of his $10 million estate to his three children from the first marriage. He would like each child to receive about $3 million from his estate, so he wants the insurance to help pay for the anticipated estate tax liability expected as of today. He will most likely buy some additional insurance for his second wife, as well.
In your fact finder, you find out a few things about his health, but nothing too outrageous. Since he works out at the health club, plays a mean game of tennis, and can whip you in a game of golf, you know he's in great shape.
First, he told you that his doctor told him he has a slight leak in one of his heart valves. He's had this for a few years now, and his doctor told him not to worry about it. He is not on any medication for it and tells you that it has never been a problem.
He also told you that he went on some blood pressure medication about a year ago. He said that the first couple of medications made him kind of sick and that they just settled on the right medication about two months ago.
He lets you know that he feels really good about everything because about six months ago he had a heart scan done from a clinic he heard about on the radio. His doctor did a follow-up stress test and told him everything looks great.
He's going to put the policy in an old irrevocable trust that he created after he got divorced, so he would like to complete the application and get things going. As you know, he tends to travel a lot, sometimes even out of the country. He would like to get everything done before he leaves in two months.
You submit the case to your favorite company and five weeks later you get a call that makes your stomach turn. The voice on the other end says the worst word you could hear: "Declined!" After you hang up, you keep telling yourself, "He's so healthy! There's nothing wrong with him. I can't understand how this happened." You ask yourself, "What do I do now?"
Try calling up someone who specializes in impaired risks and going through the case. Sometimes, a brokerage operation that is experienced in special risks and can summarize the risk can make or break a case like this.
Let's review some of the "Red Flags" in this case -- and what to look out for in future cases.
o Red Flag Number 1: "Slight valve leak." When he indicates that he has a valve leak, he most likely is referring to a heart murmur. Now, heart murmurs can be anywhere from preferred to declines, depending on the details of the echocardiogram. The "Red Flag" here is the leak. This most likely refers to a regurgitation. Now, regurgitations can, again, still be benign enough to allow for a preferred rating, but they can be serious enough to cause a decline.
In order to do a proper evaluation for insurance, we would need to see as many echocardiograms as possible. The last one done may be sufficient, but if his condition is continually worsening, the one echocardiogram may not be enough. These conditions may take years or even decades to progress to the point where corrective surgery would be required. Therefore, the clinical physician oftentimes will tell the client not to be concerned about it and to come back in a year or two for another echocardiogram. The physician will want to see how things have progressed at that time. Therefore, clients can be left with the impression that nothing is actually wrong.
o Red Flag Number 2: Blood pressure. He indicated that they just settled on the proper blood pressure medication two months ago. Most companies would like to see blood pressure well controlled for as long as possible, two years in most cases, maybe less depending on the follow up and other circumstances. For field underwriting, companies may prefer to see all blood pressure readings available for the past few years in order to get a proper gauge.
o Red Flag Number 3: Heart scans. Many clients have succumbed to the fear that they may be developing heart disease and have pursued having a heart scan done. Many times this is of their own accord. An EBCT, as they are clinically referred to, will give a calcium score for each of the major arteries of the heart and then a total score. Most companies have a rating system based on the results of the scores. It's always nice to be able to have a copy of the results of the EBCT for field underwriting purposes.
But the bigger Red Flag here is the follow up stress test. That means that his score was high enough to prompt his doctor to order a stress test. The underwriting problem is that even though the stress test may have been negative, the heart scan indicates some type of heart disease process. This can be one of those classic situations where the physician tells the client not to worry and the insurance company rates or declines the coverage.
o Red Flag Number 4: Travel. In today's environment, companies will decline or rate for travel outside of the country. In this case, a company would need to know exactly where he's traveling; not just the country, but also the cities. How long will he be there, and what will he be doing there? Also, some states have recently passed regulations that prohibit assessing a risk on past travel. So the state in which the case is being written is essential to the outcome. Note that many companies will not participate in cases in which a client is traveling outside of the country in the next few months and just now applying for insurance.
The lesson here is, do as much field underwriting as possible. Of course, it's best to do this before the application is written and submitted. The ultimate goal is to be able to submit the case to a company that will work with you and your client on these areas and issue the most competitive policy possible. In the end, "Red Flag" field underwriting will help you serve your clients and companies as best as possible.
Michael Cohen is vice president of the Eugene Cohen Insurance Agency Inc. and is a member of Risk Appraisal Forum and the Association of Home Office Underwriters. Mr. Cohen has been helping insurance brokers with life, disability, and long term care insurance for the past 16 years. For more information, call 800-333-4340 or e-mail michael@cohenagency.net.
