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While Einstein's prescription became the basis for atomic energy, the underwriting formula simply quantifies the state of the art for the risk evaluators of our business. Life underwriters have better information to work with, and in bigger amounts, than ever before, thanks to advances in medical testing. At the same time, competitive forces can drive underwriters to make faster decisions, while carriers aim for more accurate decisions. These crosscurrents make modern life underwriting more challenging than ever.
"The new reality is that when financial instruments are not correctly underwritten, it causes chaos," said Dr. Robert Stout, speaking to a packed breakout room at the 27th annual meeting of the National Association of Independent Life Brokerage Agencies (NAILBA) Nov. 14 in San Diego. Dr. Stout is the director and president of the Clinical Reference Laboratory in Lenexa, Kan., a position squarely at the intersection of Medical Street and Insurance Avenue.
Underwriting evaluates risk, but not just health risk -- financial underwriting is important, too. "Insurance underwriting is based on sound financial principles," Dr. Stout said. "At times, underwriters are asked to disregard those principles." As the banking and real estate industries can attest from recent painful experience, too much disregard for sound underwriting can bring on disaster.
Life underwriters have better information to work with now because it is much more focused on insured lives, rather than on clinical data that may have nothing to do with insurance. "The old system of risk classification was based on clinical studies that looked at selected groups of impairments," Dr. Stout said. "But the risk present in insurance is different than in a clinical setting. Now insurance companies study insured lives. Very large amounts of data are now available for analyzing risk in the insurance-buying public." This allows insurers to analyze impairments that were previously considered uninsurable, such as HIV and Hepatitis C.
New testing methods can look at genetic predispositions to disease, and better classification of diseases. Stem cell therapeutics, an emerging field, will help with cardiovascular interventions, and treatments for kidney and nervous system problems, and as this medical frontier expands it will profoundly influence underwriting decisions.
Testing itself is an evolving discipline. "Some tests are not predictive of mortality; these should be removed from the applicant's profile," said Dr. Stout. "The normal range needs to be adjusted for many tests, too."
Even the most advanced tests, however, can only assist the underwriter's expert judgment, not replace it. "In the biological world, it's not black and white," Dr. Stout said. "It's black, white, and lot of gray."
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Burt Meisel started his monthly LIS column, "Is This About Insurance?" in December 1997. The headline over his first column was "I Have Good News and Bad News." Unfortunately, I have only bad news to report about Burt. He recently was diagnosed with a rare form of amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig's disease. Burt is now in the care of his wife, Sharon, and four daughters, including Shelley Fiore, whom Burt brought into his business many years ago. His last monthly column will appear in the February issue.
In the 83-year history of Life Insurance Selling, Burt stands as one of our great institutions. Over 11 years and 134 monthly columns, he wrote simply and eloquently about the daily challenges of making a living selling life insurance. Burt had a long and successful writing and speaking career before he joined us, too. He has spoken numerous times at the annual meeting of the Million Dollar Round Table, of which he's a 38-year life member, and has addressed many other industry gatherings over the years. He also has authored several books and wrote the Query newsletter for the old American Society of CLU & ChFC.
At this writing, we are considering candidates to succeed Burt as our monthly life insurance columnist. In the meantime, I'm sure Burt and his family would appreciate your messages of support and encouragement. His e-mail address is ibm11@prodigy.net. Burt, thanks for all the wisdom and humor you imparted to all of us over the years. You will be a tough act to follow!
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On another, happier note of transition, I'm pleased to introduce our new publisher, Betsy Kominsky, vice president and group publisher for Summit Business Media. Betsy joined Summit this past summer in the company's acquisition of WiesnerMedia Financial Group. She has worked closely with the staff of Senior Market Advisor for several years, helping SMA build a strong competitive position in the trade media. Her experience and enthusiasm will be a real asset to us.
