More than a few times, I have interviewed insurance professionals who cannot meet the health underwriting requirements of insurance products they themselves design and/or market.

This unique piece of insurance lore raises a number of questions and issues in that most tender of areas: insurance underwriting. We will look at the issues here, ranging from personal to product.

It always is surprising when an insurance professional tells me of having a not-qualified status. The person might say something like this: “The policy really works well for the small business owner or mid- to upper-level executive. Id like to own one myself, but I cant, because I have (name a health condition)”

Naturally, I feel sad when I hear that. Here is an insurance pro who would like to buy an insurance product that he/she has built or helped build, or sold to others, but who cannot do so due to health factors. One wishes it werent so.

On the plus side, I am told that such circumstances have put fire in the belly of affected producers. That is, they become motivated to try to keep clients from suffering a somewhat similar fate. You know how it goes: “Joe and Jane, please consider buying this policy now while you still can qualify. Its really important. Let me tell you why”

A not-qualified status also keeps the juices flowing in certain product developers. Some say their own personal circumstance has given them a reason to adhere to best practices in design. The thinking is: “I may not be able to buy this, but I am bound and determined to build it the right way for those who can.”

Still, when professionals cannot qualify for the coverages they sell or develop, they are profoundly aware that they are going without. Some say this has made them more sensitive to the feelings of clients who cannot qualify.

But some also say it puts them in an awkward position at their firms. As you know, one of the most common tenets of product success is to “own it yourself.” But these professionals cannot do that. Does this mean they are contributing to a products failure? Its doubtful. Yet some worry how their fortunes will fare if word gets out that they do not own the policy they are championing.

Now, for the bigger issue: Underwriting itself. These personal vignettes never fail to remind me about how strongly industry people feel about underwriting.

Most producers with whom I speak say they do understand an insurers need for medical (and financial) information–that it fosters competitive and accurate pricing for risk borne. But many also feel confounded by the various underwriting requirements, the different practices among insurers, and the declines and rate-ups that “seem to come out of left field.” Some just wish for less selectivity, so more clients could qualify at affordable rates. A few tell of feeling emotionally drained, when having to deliver news of a decline or rate-up.

Meanwhile, most company executives tell me they do understand a producers need for fewer underwriting constraints (questions, rules, mechanics, documentation, etc.).

But these executives say they have existing policyholders to protect, profits to make and competition to meet (and beat). If all apps were written guarantee issue, some warn, the rates would be sky-high–and then producers would complain about that. Some wish the producers who are concerned about negative underwriting decisions would be more selective in the apps they submit in the first place.

It sounds like a stalemate. But after reviewing the trends in this area in recent years, Ive concluded its not a total standstill. The industry is inching toward some common ground. Examples:

Multi-question health questions. These appear in many applications today, especially those used at the worksite. These apps group the ailments and diseases into 3 or 4 laundry-list questions. These do not remove health questions, and some producers complain the long lists are confusing. But others believe the groupings simplify the question-asking process.

Guaranteed issue life for jumbo single premium cases. This is a high-end type of product with a lot of back-end complexity, so its not for the broad market. Still, it shows where the thinking is going.

Simplified issue. This has been a central fixture in the fast-growing worksite product market and, of course, many of the direct mail campaigns.

Guaranteed issue for “basic” coverage plus fully underwritten buy-ups. Producers really like this one. The guaranteed issue gets them in the door, because it ensures all the workers can get coverage. The buy-ups allow for personalized selling. Some companies approach this gingerly, but they keep exploring it because they know it has appeal.

Tele-underwriting. These programs do ask the full complement of health questions, but the tele-staffers do the probing, not the producers. This takes the producer off the hot seat–a plus for some (though not for those who prefer to keep control over the process). As for the insurers, they say this is a cost-effective way to improve speed and accuracy as well as to reduce the hassle factor for the field.

Pre-qualification at the field level. Life brokerage agencies have done this for years and traditional general agencies, too. But in more recent years, producer groups, various insurance specialty shops and high-end practitioners do field underwriting as well. So, cleaner apps go in and more accepts go out.

Those changes do not make for total resolution, but they do show progress.


Reproduced from National Underwriter Life & Health/Financial Services Edition, February 13, 2004. Copyright 2004 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.