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Filed Under:Life Insurance, Life Products

New Directions and Trends in Life Underwriting

Whichever major re-insurers remain in the market, just a handful of them are having a profound effect on life insurance company underwriting approval, ratings, medical requirements, and pricing. (Over the last five years, a consolidation juggernaut has reduced 12 of the largest re-insurance companies to a group of just five.)

Today, these heavyweights are imposing strict requirements, monitoring compliance, performing audits, applying penalties, and even threatening to terminate their relationship with specific insurance companies.

At the same time, the many life carrier consolidations mean companies may find it difficult to hire qualified underwriters who operate within their geographical area, presenting a need that may lead to a tremendous number of underwriters working outside of the office. While this can certainly be an effective way to meet the needs of both insurance companies and independent underwriters, it can lead to a painful transition for companies and their brokers.

Nowhere has this situation had a greater impact than with the impaired-risk underwriting marketplace -- at this point, virtually no life companies specialize in this area. At the same time, however, many carriers are accepting impaired applicants who might have easily been rejected in the past few years.

It is not uncommon for carriers with their own underwriting manuals to make multiple corrections, changes, and enhancements during the course of a year, incorporating both medical and technological improvements into patients' treatments and the status of their condition.

In addition to these rather broad issues, there are a number of underwriting trends and changes taking place right now. For example, we have seen:
o Simplified issue of larger-face-value-amounts, which is often marketed through banks, the Internet, and property and casualty companies, both through brokers and directly.

o Use of prescription Web sites in order to cut down on the number of attending physician's statements (APS) that are ordered. This can reduce approval time and lower costs. Based on the particular prescription medicines, an underwriter might decide that there is sufficient case development to avoid the APS. They typically base these decisions on what information is already available, such as the results of the insurance exam, client inspection, blood tests, and family history.

o Use of new and improved methods for detecting mood disorders and determining inherent risk, if any.

o Improved cognitive testing technology and state-of-the-art testing capabilities. This can assist in situations such as underwriting an elderly client, as it provides objective information about individuals who might otherwise have been declined. It is common for an underwriter to hang onto the slightest suggestion of a concern with either cognitive abilities or memory.

o Greater objectivity and flexibility when considering negative family medical history.

o Introduction of requirements for additional testing beyond what the physician may have ordered. This can help clarify or determine the specifics of particular impairments.

o The use of new methods for screening clients for cardiovascular disease.

o Highly fluid foreign-travel underwriting that is subject to frequent changes, depending on such factors as destination, citizenship, visa status, amount of travel, and purpose for travel.

o Carriers taking a hard look at a client's commitment and objectives when they apply for larger coverage amounts at age 70 and beyond -- this could indicate that a client has been advised to buy the policy in order to "flip" it into a life settlement and profit from the transaction.

These trends send a clear message to producers, making field underwriting more essential than it's ever been.

Allan D. Gersten, CLU, CFP, ChFC is chairman of First American Insurance Underwriters. He can be reached at 800-444-8715 or

How Does Field Underwriting Work?

When field underwriting, just two simple steps can greatly help underwriters during their decision-making process:

Secure a risk finder form. Whether provided by your carrier or an association --- such as the National Association of Independent Life Brokerage Agencies (NAILBA) at -- such forms may outline the client's medical history and doctors who were consulted, list insurance in force, authorize a release of insurance policy details, and include a HIPAA authorization to secure medical information for underwriting purposes.

This information should be used in conjunction with a needs fact finder that provides a range of coverage options for the client based on their answers to a series of questions.

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Nichole Morford

Nichole Morford
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