Life Underwriting Makeover: Its Transforming The Business

A recent industry survey of North American insurers offers substantial encouragement that life insurance underwriting is in the midst of an ongoing radical transformation.

What worked in the 20th century is now being seen as incompatible with 21st century imperatives such as expense control, faster app-to-approval cycle time, less burdening of producers and greater client friendliness.

The survey shows continuing declines in use of chest X-rays, treadmill tests and doctor exams. And blood testing–essentially universal at low thresholds since the late 1980s–is progressively giving way to oral fluid screening. This is true mainly under age 40, where some insurers now rely on oral fluid for amounts of $500,000 and even higher.

These timely changes reflect the growing realization that the best way to acquire a baseline insurability perspective is to conduct an efficient 12- to 14-minute telephone interview. The key element of these interviews is to “drill-down” on all risk-related “yes” answers with further questioning.

Let’s say the client acknowledges a history of high blood pressure. The telephone interviewer then asks about the most important aspects of this impairment. This, in turn, empowers the underwriter to take action in many cases where an attending physician’s statement would once have been obligate. (See box.)

As every producer knows only too well, the APS, more than any requirement, protracts underwriting, invariably for weeks and often much longer. If carriers significantly cut APS volume–seeking them out only when truly needed–this would do more to speed up risk assessment than anything ever accomplished in life insurance history.

It is eye-opening that prominent insurers, with track records of excellence in mortality outcomes, have had reductions in APS dependence ranging from 30% to 80%+ of the number once mandated.

A slower transition is taking place at older ages because the degree of short-term risk is much greater. The essence of effective “geriatric” underwriting is recognizing that the cumulative effects of frailty hold the key to excess mortality.

Factors highly unfavorable in mid-life, such as borderline high cholesterol and being moderately overweight, actually become protective of longevity as compared to the opposite scenarios (low/falling cholesterol, underweight).

Blood pressure analysis provides an excellent example of how underwriting over age 60 is different. Earlier in life, diastolic BP elevations are ominous and treated conservatively. Later on, systolic elevations take on greater prominence.

In fact, an impressive number of recent studies have shown that it is the difference between the systolic and diastolic numbers, known as the pulse pressure (PP), which matters most. For example, a BP reading of 150/60, while appearing desirable based on conventional wisdom, yields a distinctly unfavorable PP of 90. This is a clear sign of (often initially silent) cardiac dysfunction.

What is most encouraging about this ongoing underwriting makeover is the prospect for new insights that complement the speed and efficiency of telephone underwriting. One is recognizing that coronary disease, the No. 1 cause of death in the United States, exerts its adversity through unstable artery plaques triggered by the effects of inflammation.

Most heart attacks are due to sudden events in these vulnerable lesions rather than gradual artery narrowing. Now, tests exist that focus on the causes of unstable disease, 2 of the best of which are the inflammatory marker high-sensitivity c-reactive protein (hs-CRP) and advanced lipid tests known as apolipoproteins. Another one is brain-type natriuretic peptide (BNP). As deployment of these simple blood tests increases, fewer treadmills will be sought and the better cases with stable CAD will be underwritten more favorably than in the past.

Another promising development is measuring actual cholesterol deposition, rather than just circulating blood cholesterol. A new method, using a pad painlessly to remove shedding epidermal skin cells from the palm of the hand, is currently being evaluated in trials undertaken with insurers. So-called “skin sterol” may be the next piece added to the growing array of inexpensive, rapid and reliable resources for coronary disease risk analysis.