The current state of the financial markets has forced high-net-worth clients and their advisors to scrutinize their wealth protection strategies. As a result, many advisors have rediscovered life insurance as a reliable and effective vehicle for wealth protection and asset transfer.
However, the aging U.S. population may have health concerns that can affect the availability and cost of life insurance for applicants classified as "impaired risks." From a life insurance perspective, impaired risk typically refers to applicants with a history of significant health problems such as heart disease, cancer, diabetes, memory loss or sleep apnea. In some cases, impaired risk can apply to non-medical concerns, such as a poor driving record, bankruptcy or frequent foreign travel to countries with security threats.
Integrative impaired risk advocacy, a valuable approach for managing these cases, incorporates expert advocacy from the perspective of both clinical and insurance medicine. Clinical medicine skills are essential to understand the scope, depth and implications of an applicant's health issues. Insurance medicine skills are essential to accurately and effectively "develop and package" an applicant's medical history to obtain optimal pricing.
Exceptional underwriting outcomes always require both art and science to "package" the risk for optimal pricing--blending traditional and non-traditional underwriting evidence to create an improved assessment of the medical risk and its impact on life expectancy. Integrative case presentations include often overlooked information obtained directly from the applicant, as well as physician commentary and clarifications, additional testing, second opinions, and supporting studies from medical literature. All of this evidence is then used to reframe the context of an applicant's health history to support the most optimistic life expectancy.
Recently, the integrative advocacy approach was used for an applicant who survived a heart attack and later sought to obtain life insurance. In this case, the heart attack served as a "wake-up" call, prompting the applicant to make significant lifestyle changes including adopting a healthy diet, weight loss, stress reduction, regular exercise, and compliance with medications and follow-up care. These lifestyle changes, along with normal, follow-up cardiac exams, provided sufficient evidence to package this case and argue successfully for a longer life expectancy and subsequent lower pricing.
While the logic of the integrative advocacy process is apparent, the discovery process--the actual fact-finding, documentation, and construction of the case presentation--is very high-touch. Effective integrative impaired risk advocacy involves four stages:
1. Interviewing the proposed insured to hear the medical history from his or her point of view.
2. Reviewing the medical records for accuracy and consistency.
3. Clarifying the inconsistencies or gaps through collaboration with the applicant's physician, retesting and obtaining second opinions.
4. Presenting the packaged and non-medical evidence as a compelling case in the same way that an attorney delivers a closing argument to a jury.
The result is an integrative presentation built from research, analysis, innovation and the meticulous integration of medical and non-medical evidence. The most effective approaches to impaired risk advocacy focus on direct interaction with the applicant in order to advance communication and build relationships.
Case Example: Multiple Medical Problems
An 86 year-old widow created an irrevocable trust that applied for a $20,000,000 life insurance policy to offset the cost of her significant estate taxes. Her initial application for coverage was declined due to her medical history and a recent EKG with new, abnormal findings. Her advisors suggested the case be submitted for a second opinion to an agent who specialized in impaired risks.
During the case review, it was clear that the EKG was abnormal, but the applicant's medical file was confusing, with numerous inconsistencies. In an effort to clarify the medical history, the agent made direct contact with the applicant's primary physician. As a result, the applicant underwent new cardiac testing that, in fact, showed no evidence of significant heart disease.
The applicant's primary physician was also asked to provide commentary and clarification for a list of other concerns. The physician's detailed update documented that the client was in good health.
In addition, the client was asked to complete a functional ability questionnaire. This clearly demonstrated she was high-functioning in all areas of her life--including driving, managing her finances, social engagement, community volunteering and independent living.
With new cardiac testing, written clarification of the client's current health status from the applicant's physician, and the functional ability profile, the case was repackaged and ultimately, coverage was negotiated at preferred rates.
The outcome of this case is, in fact, similar to many others. Incomplete information often leads to negative outcomes. When clients allow agents with expertise in impaired risk to present their case appropriately, the outcome often is a more accurate and effective portrayal that ultimately may enable the applicant to use life insurance to solve an estate-planning problem.
David Solie (David.Solie@marshpclis.com) is a managing director of Marsh Private Client Life Insurance Services in Woodland Hills, Calif.