To Grow Disability Sales, Think Outside The (Information) Box

Maternity claims comprise 26% of all STD claims and 13% of all LTD claims.

Attendees at the meeting learned that each 35-year-old woman has a 7% chance of becoming pregnant during the policy year. If a woman already has two children, the percentage drops to as low as 3%. And, if she has one 2-year-old child, the mother’s chance of becoming pregnant jumps to 15%.

Using this type of information, carriers could substantially improve the disability coverage plan design and price the case accordingly.

Other information exists that could be used to improve underwriting practices. Information that carriers should consider leveraging include: facts about home ownership, credit scores, food purchased and physical activity level–all of which is available from a variety of sources. This information could hold the key to better underwriting and carriers could match the plan census with the information described above; it could certainly lead to better underwriting.

Another area of improvement is with midsize cases and the use of experience rating.

For years, underwriters have chased the “great case” or the “no claims in 3 years” case and have driven prices to an unsustainable level. The believability or credibility of a midsize case may be grossly overstated. Credibility formulas generally do not account for the predictability of the past. Carriers need to better understand the case history, the quality of the information being underwritten and changes in the environment. Using a purely formulaic approach to underwriting midsize cases will likely lead to underpricing and churn.

Furthermore, credibility formulas should be significantly adjusted on a case-by-case basis for these midsize groups. Some carriers now employ intricate methods to pinpoint how much credibility they are going to attribute to a mid-size case. Things like plan design and history, actual-to-expected claims review and quality of data come together to adjust credibility, up or down.

In an age where information is easily accessible via the Internet, companies now have the ability to gather and apply data previously inaccessible to the insurer. They do not have to ask a broker to obtain that information from the customer.

The opportunity and the tools necessary to grow inforce blocks exist. Using contemporary information sources and purposefully integrating non-traditional demographic data into underwriting models will drive better or more stable pricing, and support longer-term customer relationships.