Insurance agents, their clients, and yes, insurers too, have long wrestled with the challenges of an underwriting and issue process that is slow and aggravating, if not worse. All too often, dissatisfied clients, and dissatisfied producers, are the result.

Increasingly, the demand today is for financial products in distribution channels whose very paradigm is a speedy sales and delivery process. To work, such products have to be easy to understand. They must also be salable in the same manner as are most of the other vehicles the account reps have been selling.

This can be a challenge. The non-term life insurance vehicle is anything but simple to understand, given the abundance of charges–especially the cost of insurance charge. And insurance, even before the prospect says, “Lets go ahead,” is anything but salable in the same manner as a typical investment offering.

Therefore, if reps are initially willing to go forward with the insurance sale, the lengthy issue and underwriting process provides rationale to decide that other sales are much worthier of their time.

With due respect to Bob Dylan, come gather around people, for the times they are a changing. Theres an extraordinary amount of work taking place in building simple products with a streamlined underwriting process.

This work promises to finally and dramatically transform the sale of life insurance, enabling insurers to increase penetration of financially oriented distribution channels. Following are areas where changes are occurring:

Before looking at them, keep in mind that the goal is to take no more than a few days, or perhaps a few hours or less, to complete the underwriting process. A dramatic reduction in the process time is the objective.

Streamlined applications. Apps now typically have a limited number of questions, sometimes just four or five.

A major objective in the financial channels is to minimize the amount of non-sales work performed by the rep. One way to do so is to limit as much as possible the reps involvement in the app process.

Streamlined may mean the same as simplified underwriting to some people. The reality is that the process, as defined here, leads to meaningfully better data than is typically available in more conventional simplified issue offerings. That is critically important for product competitiveness and persistency.

Rapid hands-off to experienced tele-underwriters. To get the account rep to focus on sales, and to achieve increased speed, this hand-off occurs as soon as possible after the client signs the application.

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

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.