Understanding Underwriting Concerns Is Key To The Disability Sale

By John G. Micheli

Youve done whats right for your client–you have sold life and disability income insurance to take care of the financial burdens that can occur with either death or disability. The applications have been sent to the home office to be underwritten. You feel satisfied knowing this business transaction will lead to referrals, potential repeat sales and a sizable commission.

The applicants only physical problem is a back condition, caused by a slipped disc a few years ago. It certainly isnt life threatening, and your client leads a very active lifestyle, so it doesnt appear to be a disabling condition. You assure your client that there will be no problem getting these policies issued. Youve had a great day!

Then it happens. Based on information received with the application and the medical reports, the underwriter issues a standard life policy. The disability policy, however, is issued with a rider on the back because that condition is still a threat to the clients ability to work.

Unfortunately, when you deliver the policies, the client does not understand why the life policy would be issued standard and the disability policy issued with a rider, especially after you assured the client that there would be no problem issuing either policy. The client loses confidence in you, and you lose confidence in the underwriting process. You question why you are even selling DI insurance.

Could you have avoided this situation?

Yes, by understanding the difference between life underwriting and disability income underwriting. Life underwriting is concerned primarily with mortality, which is the incidence of death within a certain group of people and the chances of a person dying within a certain period of time. Morbidity, with which disability income underwriters are most concerned, is the frequency and duration of disability within a group of people.

In fact, there are other factors, such as avocations and moral behavior, which pertain more to disability income underwriting, since the policys benefits are received by the insured rather than a beneficiary. Also, some carriers still offer a noncancelable DI policy, which means that once the policy is issued, and no material misrepresentation or omission is made, it cannot be revoked.

Existing and/or pre-existing health conditions are the basis for disability underwriters ratings and riders. The following are some samples of health conditions that may result in a rating or rider:

1. High blood pressure, whether the applicant is taking medication or not, because abnormal elevation of blood pressure has a lasting effect on a persons health and ability to work.

2. Back conditions are a major concern as they are usually degenerative by nature. In some cases the back problem may initiate other physical problems for the applicant.

3. Joint problems are carefully examined because many medical problems occur in conjunction with these types of conditions.

4. Weight and height standards are strictly adhered to, as being overweight can put extra strain on the heart, back and joints.

Once you learn to identify the potential health problems of your prospects, you will be better able to prepare them for the possibility of a policy being issued with a rating or rider.

Never guarantee that the policy will be issued standard. The applicant most likely will not accept a rated or ridered policy after such a guarantee is made. You must take the initiative and prepare your clients for the rating or rider by using such phrases as “special risk” versus “substandard.”

Remember, the medical condition is not your problem–it is the prospects problem, and being honest with them is the best approach to take. Explain to the prospect that the underwriter may not be able to offer coverage for specific medical conditions or that a rate may be added for the condition.

Also, bring to their attention the need for disability insurance, as there are hundreds of other disabling conditions that are covered, even by a ridered policy. The “special risk” policy is not a problem, it is a solution to the prospects problem.

It is important to keep a positive attitude with your prospects and clients, as this sets the mood for the entire underwriting process. If your attitude reflects negatively toward the process, your prospects will sense that the disability product you are proposing is not of quality–and that the process isnt fair.

Remember, whether sold as a package or individually, the life and disability income products are underwritten differently. Both products are necessary in your prospects insurance portfolio, and, with your experience and positive attitude, both products can be sold and delivered with confidence.

John G. Micheli, CLU, is a disability income specialist. He has over 20 years experience selling disability income insurance and other financial products. He can be reached at john_sandi@msn.com.


Reproduced from National Underwriter Edition, March 31, 2003. Copyright 2003 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.