What is old? That depends. In 2000, the majority of life underwriters responding to an older age survey said they considered people who are age 60-65 to be in the older age group.
But since then, they’ve revised their definition–upward.
In 2006, for example, over 60% of life underwriters responding to a follow-up survey said old age starts at ages 70 and up, said Lynn Ruezinsky in a life insurance workshop here.
Furthermore, the maximum issue age the underwriters said they would accept for any life coverage is up, too. The maximum was age 80 in the 2000 survey, but age 85 in 2006 survey, said Ruezinsky, associate actuary with MetLife, Bridgewater, N.J.
She was speaking at a workshop here at the 6th annual life insurance conference of LIMRA International, LOMA, the Society of Actuaries and the American Council of Life Insurers. Her data came from a SOA survey of key chief underwriters about older age underwriting. The most recent version of the survey was conducted in August and September of 2006 and the results were reported out in 2007.
Another panelist agreed with those findings. Most companies today start older age underwriting at age 70, said Allen Klein, vice president-actual experience studies at AIG American General, Houston, Tex.
“That’s when the problems start” becoming noticeable, he said, referring to cognitive, health and similar difficulties that older people have.
Michael Fasano, president of Fasano Associates, Washington, D.C., says his firm now has over 100,000 files on older age cases it has handled over the last 7 years. His firm underwrites life settlements as well as life and health insurance.
“What we have learned is that people are living longer, and that life underwriting needs (to make) more adjustments for (people who are) over age 65,” he said.
“The older age market is a golden opportunity for us,” said Klein, citing demographic trends. For instance, he said people ages 65-84 will represent 11% of the U.S. population in 2010 and 14% in 2020, according to the U.S. Census Bureau in 2004.
But underwriters don’t have much room for error if issuing to age 90 or even age 80, he cautioned.
Also, today’s larger premiums and face amounts imply larger financial impact, he said.
“I don’t want to scare you away from this business,” Klein continued, but insurers need to learn about the risks they are taking in order to underwrite successfully.
Klein reviewed a list of 21 indicators of mortality at the older ages–taken from an SOA study of older age underwriting (see chart).
“The top three indicators are current health, cognitive function and frailty,” he noted, suggesting that underwriters could approach older age cases by building a program around those top three items. He identified a number of tests that could be used in all three areas, including 8 different cognitive tests (not all of equal value).
Eleven of the 21 indicators are not picked up by normal underwriting, Klein pointed out, so additional testing is required.
But not all companies run all available tests. For instance, according to Ruezinsky, fewer than half the underwriters surveyed in the SOA study said they now use, or plan to use, cognitive testing.
When they review their underwriting guidelines in the future, more may start doing so, she indicated, but not now.
There are obstacles to asking more underwriting questions and doing more tests at the older ages, conceded Klein. These include the length of time involved, the associated costs of acquiring more information, the impact on speed of issue, how competitors are handling this, and pressure from agents, among others.
Still, he said he thinks insurers will start doing more cognitive testing in the future.
Fasano added that underwriters will need to make some underwriting adjustments to current approaches. For instance, “relative additional mortality for any impairment decreases as overall expected mortality increases,” he said, “so they will need to use age formulas to adjust for this.”
Also, the rate of progression for some impairments won’t create a life threatening event in a senior’s remaining lifetime as it would for a much younger insured, he said. So underwriters will need to use “a little more liberal eye” when looking at these risks in older age applicants, he said.
Finally, some impairments–such as prostate cancer–move more slowly in older people than younger people, Fasano said. “If you are looking for opportunities, this is an opportunity in underwriting. Ask, how bad an impairment is it?”
With 75-year-olds, Fasano added, pay less attention to family history and cardiovascular risks and blood samples and focus more on cognitive function and frailty.