One of the most gratifying services a life insurance professional can provide is to secure underwriting successfully for someone who has been through difficult medical experiences and perhaps has even given up on their insurability. These cases can be financially rewarding as well.
But how to navigate the impaired risk case through medical underwriting? Here are 11 key secrets:
1. Summarize and cover the data. If the case is likely to be a substandard risk due to a prior medical condition, address it with a cover letter and a one-page brief that describes the specific case history. Data presented professionally, directly and efficiently makes it easier for an underwriter to come to a positive decision.
2. Give a target. Run illustrations in advance of medical underwriting. If it appears that the case must receive a specific underwriting category to get completed, be prepared to let the underwriter know what medical offer is necessary before submitting the case. This saves the underwriters time (which they appreciate). More importantly, the power of suggestion is a subtle beginning to negotiation with the carriers.
3. Create a generic informal inquiry. Create one combined application for use with your most frequently used insurers. This makes it possible to solicit several preliminary offers at once, and limits the nuisance the client would experience if having to sign over and over with each company approached.
4. Control the information flow. Handle the coordination of medical exams and application paperwork expeditiously. Gather all attending physician statements directly from the client’s doctors. Make a visit to doctor’s offices that are uncooperative by telephone or unresponsive to requests for records. Once all APS and medical exam information is in hand, share it with multiple companies at once. Possessing all of the records, you are in control of the search for the best carrier.
5. Know the products. For instance, guaranteed universal life insurance can often be a substitute for term life. Reinsured heavily to keep costs down, insurance company underwriters’ hands are tied with term insurance by reinsurance treaties that create rigid underwriting standards and leave little room for underwriters to make compromises. Equipped with this knowledge, get underwriting quotes for term and permanent coverages. If the applicant can get standard underwriting for no-lapse UL and a Table 2 for term, it is very likely that the no-lapse UL will offer more value than the term policy to guarantee the same time period.
6. Find the hungry carrier. Life insurers are businesses like any other. They have cycles of greater and lesser appetite for new business based on corporate, personnel, market and industry issues. Take advantage of these cycles for clients. For instance, when a company is motivated to obtain new business, bring cases back into underwriting that may have been declined or rated. And remember, new product launches are often a time when insurers push for new sales.
7. Don’t give up. If at first you are declined, try and try again! Go to as many companies as possible to find the offer that’s needed. Use brokers and specialty underwriters to assist in the search for an offer suitable for the client. If necessary, go to smaller companies or companies that have lower ratings from the rating agencies. Keep alert to marketplace changes and new product launchings.
8. Build underwriter relationships. It is always helpful to know company underwriters on a first name basis. If possible, meet them personally at the home office. Build credibility and a professional working relationship with them whenever possible. Constant follow-up is equally important. Respond to requests for additional information quickly. Be personal–don’t rely on email. Call the underwriter frequently and seek advice on how to get the desired offer.
9. Negotiate. Once all preliminary offers have arrived, let the insurance companies know when they are not competitive. Underwriters have discretion on offers and will often be able to justify a better one when they know with specificity that their competition is offering something better.
10. Timing is critical. Similar to the “January Effect” well known in the stock market, life insurance has a “Fourth-Quarter Effect.” Underwriters are much more willing to compromise at year-end if company production is down for the year and if, in particular, they are trying to make budget. Advisors will have an easier time getting an impaired risk case completed if it is done at the end of the calendar year.
11. Be patient. Expect impaired risk cases to take at least 2 months longer to complete than typical cases due to their added complexity.
Sean Maher, CLU, CFP, is CEO, and Thomas J. Mihok, MBA, is a principal of Valley Forge Financial Group, Inc., an M Group member firm based in King of Prussia, Pa. Their respective e-mail addresses are: