A different way of gathering underwriting information for life insurers could speed up the policy issue process, supporters say, but it is raising privacy concerns in some quarters.
Unknown to many Americans, there are databases maintained detailing their entire health record, including their prescription drug history. The availability of this information to third parties has created both opportunity for the insurance industry and concern for patient privacy.
When underwriting life insurance policies, carriers use a wide range of information to evaluate risks. This includes: information found on the application, motor vehicle reports, credit histories, attending physician statements (APS), and historical medical records.
E-Nable, a member of the MIB group, recently partnered up with Nex2, an aggregator of pharmaceutical benefit information, to include the applicant’s prescription drug history as part of the information they provide insurers.
“The majority of impairments treated with prescription drugs can help build a medical profile of the applicant,” says Mark Daley, chief operating officer of e-Nable.
Another provider of risk assessment information, LabOne, is also about to begin gathering prescription drug histories electronically. Their new product, called ScriptCheck, should be operational in about a month, says Greg Sadler, president of the insurance services division of LabOne.
“By checking all this information, insurers will bring the price of coverage more in line with the real risk. The healthy individual will not be subsidizing the one looking to defraud the company,” Daley says.
However, some industry insiders feel that there is a real privacy issue here. People may not be comfortable with the fact that insurers will now have access to this information, one insider claims, and many people don’t even realize this type of information is available.
“When individuals agree to participate in a company-sponsored health insurance plan, there are certain things you agree to,” explains Daley. “The employer can share that information with third parties who administer claims. This is really claims data, because when a prescription gets filled, its a claim against the health insurance policy.”
Daley agrees that privacy is a concern at e-Nable. “The applicant has agreed to privacy and confidentiality. It’s our job to continue to keep the information confidential. Confidentiality is our obligation,” he says.
Daley adds, “we are going to use this information for the right purpose, not for marketing.”
Daley notes that companies will have to change their application disclosure to include specific reference to prescription drug history.
Agents in the field may be given the task of explaining this new procedure to their prospects, who may be wary of authorizing such investigative research.
But Sadler states that “some people may not realize that this is information that companies are already getting today. Now they’ll just be getting it faster.”
Information on an applicant’s prescription drug history is usually disclosed on the application, and will show up in the APS. But, “the turnaround time on an APS can be as long as 45 days,” says Daley. “Once the first APS comes in, there may be a requirement for an additional APS.”
The process supported by e-Nable and LabOne electronically transfers information to the insurance carrier. Daley contends that this method will make the underwriting process more efficient, allowing companies to order the right APS the first time, thus greatly reducing the time lag in the application-to-issue process.
“Companies are trying to find ways to issue policies faster,” says Sadler. “This benefits the person applying for the policy because they will get their policy issued faster,” he says, in addition to helping agents close cases in a more timely fashion.
“This will have a huge impact on agents,” Daley says. “In the future, we feel the agent won’t be collecting the APS.”
“There will always be those cases,” adds Sadler, “where the applicant could be preferred or he could be declined. Sometimes you just don’t know until you see that doctor’s report.”
Sadler feels that “this information will never truly replace the APS, however it may be a substitute in some cases.”
Daley agrees, noting “the information is not going to be enough to make a decision in all cases.” He adds, “I do think this will greatly reduce the number of APS’s–absolutely.”
Sadler states, “these products will help provide the underwriting information that once took so long to acquire.”
Using an electronic means of gathering information is a great benefit to agents, Daley notes, “getting this information at the point of sale in real time can help the agent manage customers expectations. Applicants may get an immediate approval, or require more information, such as a paramed. This will make the entire process less intrusive for the applicant.”
Daley claims this process will also give underwriters the opportunity to spend more time on cases that need more attention. “Certain applications need to be looked at more closely by an underwriter–policies with higher face amounts, special underwriting exceptions, or some of the cases submitted by high-end producers needing the extra attention,” he says.
Agents operating in the advanced markets will be pleased that “underwriters will be working on cases they ought to be working on,” Daley says.
Reproduced from National Underwriter Life & Health/Financial Services Edition, July 13, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.