Health insurance, long term care insurance, disability income insurance -- all are prone to health underwriting, and clients with less-than-ideal health may have a difficult time receiving an affordable quote or even being issued a policy.
There are myriad factors an agent must take into consideration when submitting a special risk case, but many stumble at this step. The goal is to receive the most affordable quote possible in the most timely manner possible. So we asked underwriting experts across the industry, "What is the most important thing for agents to know when submitting special risk cases to wholesalers, marketing organizations, and insurers?" Here's what they had to say.
Kimberly T. Anderson >> Product Manager, Long Term Care Insurance, Minnesota Life Insurance Co.
Despite an advisor's best efforts, it is not always easy to know if a long term care insurance application will be underwritten at the premium rate the advisor suggests or if, after expert underwriting by the provider, the policy will be approved at a different rate. The advisor does have some level of control over this process and can take steps to avoid breaking bad news to a client.
It can come as a surprise when an LTCI policy is approved at a higher premium rate than originally quoted at the time of application. There are many factors at play when this occurs, and some are more obvious than others. Very often, the cases were not rated appropriately at time of application.
The most important thing an advisor can do is become familiar with an applicant's history prior to taking the application. However, there is always the chance of a "surprise" in underwriting because the applicant is not forthcoming about medical history and prescription drug use. This leads to a secondary cause of rate increases. Because an applicant may be embarrassed or may have been treated for a condition for some time and experiences few side effects, some applicants will discount or minimize prior medical history and may need encouragement to disclose as much history of treatment and medication use as possible.
The other side of the underwriting coin is that conservative prescreening can result in a happier outcome for the client. It may be difficult for the advisor to determine if a risk should be classified as "mild" or "moderate" and whether the application should be submitted at a best or second best rate. Knowing that closer scrutiny in the home office could result in a more favorable rating, the advisor could submit the application at a less favorable rate while giving the client hope of classification at the better risk class.
Michael Cohen >> President, Eugene Cohen Insurance Agency
The art of attempting to find a good rate class for an impaired risk case usually starts with the infamous quick quote. I say infamous because these quotes can be the cause of much frustration for agents, MGAs, BGAs, and company underwriters -- and agents typically do not provide enough information to receive an accurate quote at this stage.
The key to understanding quick quotes is that they are only as good as the information that they contain and how they are presented. Here is an example of a bad quick quote: "Please advise on the following: female, age 55, breast cancer six years ago, all else is top class." On the surface, this appears to be pretty basic, but this case could be anywhere from a standard rating to a decline. There is so much more that would needed to be known in order to get a more accurate quote.
In a case like this, you should always have the pathology report. You would be surprised at how easy it is for many con-sumers to call their oncologist or personal physician and ask for the final pathology report. Many people that have had cancer even have copies of their own reports. The pathology report on this case would tell us about the tumor, the staging, the grade, if there was metastasis, and any lymph node involvement. Many breast cancer pathology reports may even include a receptor study, as well.
Of course, other factors can affect the case, such as good follow up and other possible issues that the full underwriting may bring to the surface. The majority of time, we find that a case may boil down to only a couple of issues that, if properly investigated, may have been clarified up front.
Allan D. Gersten >> Chairman and CEO, First American Underwriters Inc.
Usually, we try to pre-underwrite cases with carriers before asking for a company-specific application. We do this by securing all pertinent APSs, and then we forward a complete, professionally prepared summary to the better carriers for the risk.
If the application comes in and we find that the case is going to be challenging, we will inform the broker and work to secure a complete file in-house. It is important that we control the APSs at all points in the process and understand the risk factors involved so that they can be properly presented to the carrier and the broker can inform the client and manage the client's expectations. This control, along with proper presentation, can provide parallel underwriting with carriers that are secondary choices in the event that the primary choice does not make the best offer.
All of these need to be done considering that time is of the essence and that the offers should be expedited.
Dick Riker >> Director of Medical Underwriting, Innovative Underwriters
I'd like to extend the term "special risk case" to include business insurance cases and discuss the special and very time-consuming problems that come up in many business insurance cases.
The single biggest problem we see when receiving business insurance applications is the agent's lack of clear and detailed knowledge concerning the proposed insured's business.
Things you need to know about your business insurance case include:
- Is this a key man case or is it a buy/sell case? The underwriting is very different for each.
- Is the business bricks and mortar with lots of physical assets contributing to the valuation? Or is the business a service business where the value isn't in a few office machines but in the business' ability to generate income dollars and, thereby, profit dollars?
- What does the business do?
- And don't forget the inspection report. So many time-consuming, declination-producing problems come up in business insurance when the financial figures you supply and those that the proposed insured provides the inspector turn out to be at serious odds. Make sure your client knows the figures you are supplying and is comfortable in telling those same figures to that anonymous inspector who will come calling on the phone.
Larry Simon >> President and CEO, Life Settlement Solutions
In the life settlement market, "special risk" can be defined by medical conditions of the insured, as well as risks involving the quality of insurable interest at the time of policy issue.
One of the important issues we face relates to the determination of whether a medical condition is severe enough to deem the transaction a viatical and not a life settlement. Viatical settlements -- which emerged on the financial scene in the 1980s -- initially provided a way for terminally ill patients to cash out their life insurance policies to help pay for medical bills and other expenses. Viaticals were quickly rejected by most industry professionals, with many insurance carriers adding clauses to policies allowing for accelerated death benefits if the insured became terminally ill. Most life settlement providers are not able to transact viatical cases and would decline these cases, causing the financial professional to seek out viatical providers instead.
States have varying regulations on what constitutes a viatical transaction, with some states relying on industry model acts. Life expectancies of 24 months or less are usually defined by states as viatical settlements (although they can be as high as 37 months), as are terminal or catastrophic medical conditions. Medical conditions can be more open to interpretation depending on the state regulations and the ability for the insured to care for themselves.
Providers also take into consideration the competency of eligible seniors to confirm they have the ability to understand the terms and conditions of the settlement transaction prior to entering into the contractual agreement.
