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The Laser Underwriter Approach yields accurate quotes and keeps the processes smooth by asking these 10 key questions:
1. What is your client's medical history, including conditions, treatments or medications?
2. What is the amount of the application?
3. What is your client's age, tobacco status, height, weight and ability to live on his or her own?
4. Are you in competition? What are the other companies, face amounts and ratings?
5. Do you have related applications with other companies, such as rolling over a policy or a 1035 exchange?
6. Will your client accept an increased premium?
7. Are there any avocation, financial, aviation or legal concerns?
8. Is the amount of coverage appropriate for the client's financial situation?
9. Are there any sensitive histories such as alcohol, drug or motor vehicle problems?
10. What is the importance of this client to you, such as being a center of influence which could provide referrals?
"How much are we looking at?" That question is asked all the time, from purchasing a home with a monthly mortgage payment, to deciding what kind of car to buy, or even deciding how to allocate our hard earned money between safe, low interest investments and more risky, higher return investments.
Once the underwriter has your trial application and knows the basic medical history as discussed in our last article, the next question in the underwriter's mind is: "How much are we looking at?"
It is important to apply for a specific amount of insurance. Many trial applications do not specify the face amount, and that makes it difficult for an underwriter to properly evaluate a risk.
Trial applications are usually placed with a home office underwriter according to the amount applied for and their approval authority. Each underwriter has an approval limit, and when an amount appears to be vague, such as "anything from $500,000 to $1.5 million," or "as much as possible," the application may sit and wait while someone decides what underwriter - with what approval limit - should review the application. This can delay the carrier's response on the trial application by a few days.
The face amount helps the underwriter to get an idea of the risk being looked at, immediately. For $500,000 of coverage, the underwriter may be comfortable with the medical issues presented and the amount of medical information available on this applicant. It may be a different story for the $1.5 million of coverage, since the underwriter may need more requirements. It can put the underwriter in a tough position if an inspection and EKG may not be needed for a $500,000 face amount, but those requirements and more could be needed for the $1.5 million face amount.
The fact is, for a given applicant, the riskiness of that applicant to a carrier increases as the face amount increases. Why?
o At a small amount of insurance, the applicant is usually worth more alive than dead. But as the face amount increases, the equation balances out a bit, and perhaps the insured becomes worth more dead than alive. So the applicant's motivation for purchasing that amount of insurance becomes more important. An applicant applying for an excessive amount of insurance may have a reason for wanting that much insurance, and unfortunately, sometimes the reason is a hidden illness or fraud.
o Most people, as agents well know, tend to think life insurance might be a waste of money, and so they want it to cost as little as possible. As the face amount increases, the client is going to pay more. So the reason why the applicant is willing to pay such significant amounts in premium becomes more important. Again, sometimes the answer is innocent, and sometimes not.
o Carriers are willing to take mortality risk, but they are not willing to be foolish about it. As the face amount increases, the risk associated with the client increases. The underwriter has a responsibility to assess the case more closely, looking for issues for anything that could be suspicious.
o To some extent, underwriters stake their professional reputation on each decision they make. If the applicant dies shortly after policy issue on a particularly large case, one of the first questions that will cross the minds of company management is, "Who approved this case?" Underwriters become more cautious as the face amount increases because the costs of having made a mistake are higher, to both their employer and their reputation.
Therefore, one key piece of information your agency-based underwriter will want to know is: "How much are we looking at?" The underwriter will evaluate the face amount and the associated premium relative to the applicant's personal or business income, net worth, outstanding debts and the applicant's stated reason for wanting insurance.
An experienced, agency-based underwriter will be able to quickly look at the main medical history and determine whether you have gathered and supplied enough information to obtain a reliable quote. If necessary, the agency-based underwriter will work with you to order additional requirements, such as medical exams or doctors' records, or even just answers from the applicant, to ensure that a carrier will have enough information to give you a quality quote without delay.
You will have a happier client and will be more likely to place the case because you obtained an accurate quote quickly. And, don't worry - the cost is usually taken care of by the company with whom the case is submitted.
Next month, we'll discuss question three: What is the client's age, tobacco status, height, weight and ability to live on his or her own? There are many things that can be shown about the applicant's pre-disposition to disease by their build, habits and environment.
Bob Pedigo, CLU, FALU, FLMI, heads the underwriting division at Davis Life Brokerage. Mr. Pedigo is the former Vice President and Chief Underwriter with Indianapolis Life. As the Vice President of Underwriting for Davis Life, he assists producers in navigating their cases through the sometimes rocky sea of underwriting. In addition to being available for consultation with agents on tough cases, he is an advocate in working with home office underwriting departments. In addition to his 30 years of underwriting experience, Bob also sold life insurance early in his career.
