Why Apply Old Underwriting Practices On New Products?
To The Editor:
David Braggs article “Life Insurers Need To Refine Strategies For This New Environment” in the July 15 issue of National Underwriter raises a few questions. If insurers are striving to offer newer products that will meet their clients needs, why are some companies still applying old underwriting practices to evaluate new clients on new products?
It seems somewhere along the line we kept using the same actuarial data to formulate new premiums for new products. We just changed the name of the products and the target market, but left the underwriting virtually unchanged. Where is the added value for the customer? Is it in the new products novelty itself? Or the fact that only a few companies sell it (for now)?
If we are going to offer products that will meet todays needs we also need to adapt the underwriting of those products. We need actuaries to step forward and write about what their experiences have been regarding this subject.
We read a lot about new products and new marketing trends, but not much about what goes on behind curtains, where the big gears never stop. Sure, many companies have increased their non-medical face amounts in an effort to compete with banks, or in order to work with them.
But changes will have to be made to the underwriting of those new products. The “health conscientious” Americans shouldnt have to pay for the unhealthy mistakes of their fathers, meaning that today a 40-year-old non-smoker male with reasonable health should be able to buy a life policy for very little.
(If an actuary reads this, Im pretty sure he will say: “Well, you see, we take the mode from the root of the multiplication of all the integrals, factor everything in, and calculate an average curve that leads to these premiums.”)
Why? Because mortality is improving–fewer people are smoking, they are eating healthier and doing sports. Additionally, all the new medical technologies can detect and treat many diseases effectively, making prevention and not treatment the tool of preference.
Longevity is on the rise, and in a few years the population of senior persons will reach high numbers.
Do actuaries use current data to refresh their moratality tables, or do they have a standard waiting period of “X” amount of years they wait before reviewing them? Im not an actuary, so I dont know.
As an underwriter I see more and more medical reports of preventive surgeries for coronary artery disease where the proposed insured never had symptoms, and it was a routine checkup that prompted the echocardiogram. Or the catheterization that identified the obstruction in the arteries in time for them to be treated without it causing a major heart attack, or damage to the heart tissue.
I see cancer patients who are still in remission after finishing treatment many years ago and are insurable today. Things are changing fast.
But we are slow to adapt, afraid of making a mistake, when the mistake is hesitation itself.
Great American Life of Puerto Rico
Reproduced from National Underwriter Life & Health/Financial Services Edition, July 22, 2002. Copyright 2002 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.