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What the life insurance industry needs to do to make risk assessment consonant with the expectations of senior management, producers and customers compels the industry to rethink its approach to underwriting.

What worked in the age of paper is grossly incompatible with the 21st century.

Consider the use of screening treadmill electrocardiogram (ECG) stress tests. These are the most costly and second slowest of all underwriting requirements. Further, the primary abnormalities that underwriters hone in on with stress ECGs focus on stable (not vulnerable) coronary diseasea significant disadvantage because vulnerable plaque is what leads to most of the shorter duration claims.

Today, the imposing drawbacks to stress testing now can pass quietly into the mists of history. These are being replaced by a comparatively inexpensive set of blood tests, ones that include proven markers for vulnerable arterial obstructions.

Also, the routine chest X-ray is nearly extinct in risk appraisal. (Its about time, considering clinical medicine abandoned it some two decades ago!)

Meanwhile, in the wake of the HIV pandemic, the deployment of screening blood profiles expanded exponentially. It quickly became routine for underwriters to test blood at face amounts of $100,000 or even less. This practice must now be re-examined.

First off, blood test starting points should be raised significantly under age 40, because the major markers of early duration (trauma) mortality that underwriters can screen for are better managed by oral fluid.

The great advantages of oral fluidbesides pinpointing tobacco users and cocaine abusersare (1) that producers can collect samples conveniently and (2) the oral fluid test is far more client-friendly than a needle stick.

Another consideration is the inverse relationship between positive cotinine (smoking), cocaine and HIV tests, and face amount applied for. Bottom line: The smaller the policy, the higher the percentage of positive tests. An actuarially sound argument can be made for extending oral fluid screening well under current thresholds at ages 18-39. (Indeed, this underwriter believes screening with oral fluid should start at ages 13-17 as well).

At ages 40-65, protective value studies by industry experts show that the $100,000 face amount is a valid starting point. However, over age 65, consideration needs to be given to both modifying profile components and also screening more widely.

The underwriters biggest nemesis is the attending physicians statement (APS).

The vast majority of long-pending cases are in limbo for want of medical records. If one could reduce the burden imposed by these slow, time-consuming and increasingly pricey reports, the impact would be huge.

As was said on the 1970s television show, The Six Million Dollar Man, “we have the technology.” That is, the industry has what it takes to markedly decrease APS dependence, and with no deterioration (in fact, likely enhancement) in the volume of protective information at hand to assess risks.

This technology goes by the moniker teleunderwriting.

Teleunderwriting means replacing conventional non-medical and paramedical history taking with a teleinterview. The teleinterviewcurrently averaging no more than 12-14 minutes with virtually no customer pushbackrelieves the producer and the paramedical examiner of the tedious obligation of asking and recording the answers to the risk-related application questions.

The No. 1 teleunderwriting pay-off has been huge reductions in APS ordering, to the tune of 50% to 70%. Clearly, this has a profoundly favorable effect on application-to-issue cycle time, business acquisition cost, producer liberation from clerical detail and so on.

Given the foregoing realities of our times, why do some companies resist modernization of their underwriting protocols?

The main reason, this underwriter believes, is pressure from reinsurers to hold the line. While it is appropriate that such energies be brought to bear to halt grossly inappropriate (as in indefensibly “too liberal”) decisions to mollify field pressure, reinsurer “heat” is not advantageous when it retards progress. Not in the face of the foregoing realities.

The other prevalent obstacle to progress is, simply, innate resistance to change. This resistance is not confined to underwriting management. Medical directors and actuaries often evoke dubious objections to progressive risk management concepts. Fortunately, the tide is turning as pressure from senior management and producers drives home the core message: This should be a time of prudent change, not standing pat.

, FALU, FLMI, CLU, is president of , Inc., Greendale, Wis. His e-mail address is hankgeorge@aol.com.


Reproduced from National Underwriter Edition, November 11, 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.