Simplify Life Policy Processing? You Bet

Applicant interviews by tele-underwriters. A well-trained and consistently trained tele-underwriting staff is likely to perform a better job than a rep in appropriately and sensitively screening applicants. This is due to use of sophisticated drilldown questionnaires, developed by underwriters, that investigate specific conditions and are at least partially triggered by client responses on the application.

Electronic calls to obtain information from the Medical Information Bureau or the Department of Motor Vehicles. These increase speed, too. Such electronic calls, and real-time response, may initially cost more, but the expectation is that costs will come down as sales increase with this much desired process.

You will note that what has been defined implicitly is an underwriting process that requires no direct contact between the applicant and a health care worker. That is, there are no medicals, or drawing of fluids, or other invasive procedures.

Speed is great, streamlined applications are great, but one significant drawback of the use of such techniques is that, in the absence of independent underwriting corroborating information, the required COI charge is likely to be higher than it might need to be. This is simply because the reliability and credibility of the underwriting information is primarily dependent upon the applicant. What can one do in the absence of invasive procedures? One answer lies in the next change.

Use of prescription databases. Prescription benefit managers compile these databases. In total, these firms manage the prescriptions of a vast majority of working-age Americans. The databases record both prescription history and dosaging information. Very critically, they provide independent checks on the veracity of answers on the insurance application.

Interpretation of prescription database information. For the databases to be useful, guidance needs to be developed for or by underwriters to enable them to interpret the implications of prescription drug useincluding implications of multiple drug use. Progress is being made in this area by leading underwriters.

Is everything happiness and light? Not quite yet.

The number of lives included in prescription databases does not appear to be quite as high as desired, and access to them has been not as rapid as predicted. Expansion should come, however, as demand for such information is great. The progress will likely be ongoing and relentless, not unlike what has happened with the miniaturization of electronic circuitry.

Reinsurers have been very accommodating in terms of their maximum issue limits. Beyond some size, though, they will not want to participate or will require additional underwriting.

One last observation: The demand for product and process simplification has been very much driven by the desire to address the needs of financial distribution. Many have believed that such simplification is not only not necessary for more “conventional” producers, but also perhaps even counter-productive. However, thinking here is changing. Many knowledgeable industry participants now believe that simplification will benefit virtually everyone.

, FSA, MAAA, CLU, is president of Actuarial Strategies Inc., Bloomfield, Conn. E-mail him at [email protected].

Reproduced from National Underwriter Life & Health/Financial Services Edition, July 21, 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.