Carrier Study Reveals Many Positives In The Use Of Tele-Underwriting
While proponents of tele-underwriting contend that the method is less expensive and more accurate than the traditional underwriting process, a nagging question has been whether the savings realized are offset by poorer mortality experience.
Now, one study shows that carriers who have implemented tele-underwriting, which shifts the collection of medical information from the agent to the carrier, unanimously agree that the process has not resulted in any negative impact on mortality.
“It was either very positive or it was neutral,” says Jonathan Crumiller, author of the study and chief operating officer for Princeton Consultants, an information technology and management consulting firm based in Princeton, N.J.
The participating carriers chief underwriter or underwriting manager was the primary respondent for the study. Companies surveyed have been using the tele-underwriting process between 1.5 and 10 years, with an average of 5.3 years. While more time is needed for a complete mortality study–at least 20 years–Crumiller feels that “we reached a point where we could draw some initial conclusions.”
“Whats significant is that none of the underwriters have seen any sort of spike or discernable negative change due to tele-underwriting,” adds Dominique Ellner, marketing manager for Princeton Consultants.
According to the report, 78% of respondents stated that mortality experience was not impacted by the tele-underwriting process, while 22% said they had actually seen improvements in experience as a direct result of tele-underwriting practices.
“We actually expected a few negatives,” says Crumiller. “The ones who said it [mortality experience] was more favorable, said it was definitely more favorable–there was no question in their mind they were getting better results.”
Furthermore, the Princeton study reveals that there was a significant decline in the number of attending physician statement (APS) requests by underwriters reviewing tele-underwritten cases. There was a weighted average reduction of 45%, according to the study.
This is true for Safeco Life and Investments, Redmond, Wash., which has seen no change in its mortality experience but has seen a reduction in the number of APS requests, according to Mike Madden, assistant vice president individual life new business.
“You reduce some of those APS requirements because you get a lot more information with the telephone interview,” he says.
The quality of information acquired through the tele-underwriting process is more consistent and better tailored to meet an individual carriers requirements, says Joleen Misek, CEO of Producers America, an alternate distribution service provider based in Omaha, Neb.
“An individual in the field collecting medical data may have limited information as to what would be important to the carrier as it relates to a certain condition,” she explains.
Using in-depth decision tree logic throughout a telephone interview will help a carrier obtain the medical information needed for an underwriting decision, says Misek.
“It presents an opportunity for getting much better information,” adds Ernie Testa, a partner with Soarant, an information technology and management consultant in Middletown, N.J.
For example, when a client answers yes to a question about asthma, some carriers will automatically order an APS, but other questions can be asked to help make that determination, Misek explains. “Questions on medication, hospitalization, what triggers the asthma, is it exercise induced, or allergy induced? As a result of getting those answers you can then determine whether an APS is required or not,” she says.
Participants in the study cite the advancement of telephone scripts as one reason for the decrease in APS requests. Fewer APSs were ordered because adequate information was obtained during the telephone interview with the client.
“When underwriters look at a case, theyre either comfortable with the amount of information they have, or they want more information,” explains Crumiller. “They order an APS when they want more information.”
Reducing the number of APS requests is a source of cost savings for carriers using tele-underwriting, Misek adds. The average cost just to acquire an APS is around $20-$22, she says, and added to the doctors expenses an APS may cost a carrier as much as $80-$100.
“If you only save on 30% of them, you take that 30% over a period of time and it adds up to some pretty significant dollars,” she says.
Reproduced from National Underwriter Edition, April 28, 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.