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Basic Health Stats Say A Lot

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Note: This is the sixth article in a series of 12 discussing the benefits of using the Laser Underwriting Approach, which utilizes an agency-based staff underwriter. Each story in the series addresses one of the 10 preliminary questions that make this approach effective.

The Laser Underwriter Approach yields accurate quotes and keeps the processes smooth by asking these 10 key questions:

1. What is your client’s medical history, including conditions, treatments, or medications?
2. What is the amount of the application?
3. What is your client’s age, tobacco status, height, weight, and ability to live on his or her own?
4. Are you in competition? What are the other companies, face amounts, and ratings?
5. Do you have related applications with other companies? Did you already hurt your chances of getting the best offer?
6. Will your client accept an increased premium?
7. Are there any avocation, financial, aviation, or legal concerns?
8. Is the amount of coverage appropriate for the client’s financial situation?
9. Are there any sensitive histories such as alcohol, drug, or motor vehicle problems?
10. What is the importance of this client to you, such as being a center of influence which could provide referrals?

The staff underwriter now knows you are in competition, as we covered on the last article, but now the question becomes: Do you have related applications with other companies?

There are several thoughts a staff underwriter has when asking this question. If you have several applications out to different companies at the same time, you may have inadvertently already hurt your chances of getting the best offer. How is that?

? Your application (to the wrong companies) may have already saturated the reinsurance market.

? Your application (to the wrong companies) may have already found its way into the records of the Medical Information Bureau.

At this point, the challenge for the staff underwriter is not just to get you the best offer available across the industry, but also to mitigate the damage that has already been done. The staff underwriter will also want to know:

? What is the overall face amount and type of product you want to place?

? When were the applications sent to the other companies?

? Are all applications for the same face amount and product?

The importance of the reinsurance market

Let’s suppose that you started the trial process on your own, and that the face amount of the policy is very large. Each carrier, upon getting the trial application, will call one or more reinsurers to see what they may be able to offer on this particular trial risk.

Now, keep in mind that there are relatively few reinsurance companies, and once the reinsurer gives the first company a quote on that risk, the reinsurer has to assume that this first company will ultimately place the risk. Therefore, the reinsurer will tell the next company that calls on this risk that they have seen an application already on this person, and thus they can only do a limited amount or none at all. That severely limits the ability of each company after the first to provide a competitive quote. The first company has already “saturated” the reinsurance market.

Do you see why it is so important to send the risk only to the one company that is most likely to give the best offer to your client? This scenario shows the important role a staff underwriter can play in the success of your case. The staff underwriter can review the risk and the coverage desired, and then refer the case to the one or two companies known to work well with that particular risk. It keeps the reinsurance market from becoming saturated.

If the applications have already been submitted, the staff underwriter can review all of the companies’ philosophies and what product line each company does well. Then, the staff underwriter can recommend pursuing one or two of these applications, and perhaps withdraw the others to free up the reinsurance capacity.

The importance of the Medical Information Bureau

The Medical Information Bureau must be notified whenever an application comes into a carrier that is a member of MIB, as most companies are today. If there are several trial applications going to different companies, MIB lets all the companies know the risk has been applied for elsewhere. This is what the underwriter calls “shopping the market.”

Shopping the market tells the underwriter there is a special risk on this application, and that raises caution flags to underwriters. While no company can make a decision on a case based solely on the information MIB sends, all companies will react by requesting their own information on which to base a decision. Very quickly, your case faces significant delays at each carrier; as each orders a host of underwriting requirements.

If a staff underwriter has seen the trial application first, the necessary medical information will already have been acquired. Plus, a cover letter will have been created which will give the carrier’s underwriter upfront knowledge of the risk and the suggestion for a realistic offer. The MIB information will come in, but the underwriter will already have everything in hand, which will allow for a faster turn around for a decision.

Other elements to getting to the best offer quickly

If you have already sent the trial application to several companies, it is helpful for the staff underwriter to know if all the applications have the same face amount listed, and if the product requested is the same on all. You will usually apply for the same face and product, but if not, the staff underwriter will know to discuss this with you. Have different amounts/products been requested just to see what can be acquired? If so, have any offers been made? The staff underwriter can then transition the bottom line trial application for the best offer.

The staff underwriter also needs to know when the applications were sent to all the different companies. Companies may have some differing rules on how long an application may stay pending. Therefore, following up on an application that has already been withdrawn due to the age of the application may be energy spent for nothing. The staff underwriter will be knowledgeable about what rules each company has in place regarding this.

If the staff underwriter sees the trial application first, it can be sent to one or two companies and they can provide timely follow-up. If several trial applications have already been sent out, the staff underwriter can keep track after the fact, recommend which companies to pursue, and what companies you may want to just let the trial application become outdated.

Next month, we’ll discuss question number six: Will your client accept an increased premium on his or her policy?

Bob Pedigo, CLU, FALU, FLMI, heads the underwriting division at Davis Life Brokerage. Mr. Pedigo is the former Vice President and Chief Underwriter with Indianapolis Life. As the Vice President of Underwriting for Davis Life, he assists producers in navigating their cases through the sometimes rocky sea of underwriting. In addition to being available for consultation with agents on tough cases, he is an advocate in working with home office underwriting departments. In addition to his 30 years of underwriting experience, Mr. Pedigo also sold life insurance early in his career.


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