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In terms of disability income underwriting, a landmine can be viewed as a condition or situation that, when submitted to an underwriter (or detected by an underwriter), can explode in the producers face.

That is, it causes the application to be rejected. At the very least, the prospect is not going to be a happy camper. Remember, he or she went to a lot of effort and cooperated with the requirements to get the application through the processsupplying tax returns, undergoing examination, answering questions in the interview etc. But all in vain!

Will the agent be blamed for not knowing any better when submitting the application in the first place? Probably. Will the agent lose a client or not get referrals? Perhaps. Did the situation have to happen? Probably not.

How could the agent have known, and what could have been done if known?

Lets look at what it takes to get an application through the underwriting maze. Currently, the underwriter looks at the applicants tax returns, occupation/duties, Medical Information Bureau report, health records, and personal history interview. All these things affect the decision to issue a policy as applied for; issue with an exclusion, modification or rating; or decline.

Typical landmines that this process turns up are shown in the box on this page.

To avoid embarrassment and any inconvenience to your client, consult that list when filling out the application. It should help you recognize that going through the normal channels for these underwriting dilemmas probably will be a waste of time and effort for all concerned. Doing so probably will also have some negative consequences.

Why submit a questionable application only to find out weeks (sometimes six to eight weeks) later that it has been declined when the problem could have been avoided?

More to the point, what if anything can be done to get a policy issued when the application shows there is a landmine?

The first thing, besides knowing that a potential problem exists, is to make your prospect aware that application misinformation or omissions can produce negative results in more ways than one. Stress that full disclosure of health and related underwriting information is the only solution to a possible successful resolution.

Next, locate a brokerage that specializes in hard-to-place disability coverage and enlist its help. Typically, you can expect that the DI coverage you can obtain might only be for a five-year benefit period, although I have seen cases where longer benefit periods have been issued and without a rating or exclusion.

Are there other solutions? Yes, there are. For instance, you might advise the client to wait a few years to see if the problem disappears.

However, you need to consider whether the other solutions are worthwhile. Based on my experience, I do not believe they are. For example, the waiting and hoping approach may not work out favorably for the client or for you. The condition may never improve, for example. Or the client may just decide to go to another agent who is willing to find a market that will write at least some level of coverage.

In short, when you are dealing with cases involving a possible landmine, the old saying holds true: A half of loaf is better than none. Locate someone who specializes in hard-to-place disability insurance coverage and hope for the best.

is a specialist in hard-to-place disability insurance cases at Disability Insurance Resource Center, Reston, Va. E-mail him at info@di-resource-center.com.


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