The attending physician’s statement (APS) is a core underwriting asset. Despite all of the emphasis on expediting the risk appraisal process, it remains intrinsic to assessing insurability on a substantial subset of life insurance cases–disproportionately so at high face amounts and older ages.
The APS has another distinction. Its review commands the lion’s share of any underwriter’s time.
For this reason, “APS summarizing services” proffered by industry vendors have attracted increasing attention from insurers. Larger brokerage general agents have also shown keen interest in playing a role here.
Initially, insurer responses to outsourcing APS summarization were tepid, to say the least. Understandably, most of their concern was centered on quality and consistency. Could outsourced summaries match up to savvy underwriters’ expectations in terms of what was most significant in a given APS? Candidly, discussions about such services at underwriting study groups and other venues suggested that providers had a way to go to accommodate insurer angst.
The current “economic downturn” has catalyzed staffing reductions and renewed emphasis on operating costs. These developments embellish the prospects for significant growth in the use of outsourced APS summarization services.
That said, there needs to be well thought out appreciation of the implications of this eventuality for service providers, insurers and reinsurers.
An argument can (and has) been made that many externally-generated services that insurers use have become largely “commoditized.” In other words, they are bought mainly on the basis of price rather than differences in quality, service, etc.
As important as quality is in lab testing, APS retrieval and tele-interviewing, these pale by comparison with APS summaries in this context. What is extracted versus overlooked in an APS goes right to the bottom line of insurers.
Anyone who has done underwriting audits appreciates the degree of technical prowess that’s needed to make these discriminations. Therefore, the notion that APS summary services can be approached on a commoditized basis and largely acquired on a unit cost basis is inherently antithetical to reality.
In order for an APS summary provider to positively contribute to the profitability of its clients, that provider must have high caliber guidelines for their staff.
Furthermore, to argue that this obligation is assuaged on the basis of employing ex-underwriters to do summaries is to substitute wishful thinking for reality. Why? Because too many candidate underwriters have not enjoyed the benefit of sufficient continuing education to keep their skills at a high enough level to do this work as it must be done.
The box shows three elements that the ideal provider will bring to the table. Perhaps an example will put this in perspective. Following are the elements that must be addressed in a proper distillation of the essence of a skin melanoma pathology report:
o Type of melanoma;
o Exact location;
o Level of invasion;
o Measured thickness;
o Mitotic activity;
o Surgical margins;
o Local, nodal or distant spread;
o Results of specific tumor-related tests;
o Pursuit of expert opinions and their results.
Are these points mentioned? If so, what is said? Miss just one and the underwriting outcome could be placed in harm’s way.
The future of APS summarizing is contingent on two factors. First, insurers must realize that their impact differs dramatically from that of other underwriting-related services where the insurer’s bottom line is concerned. Second, providers must appreciate that delivering consistently high quality summaries is essential to be competitive and successful.
Whether or not these factors are fully apprehended is the fulcrum upon which the future of APS summarizing is balanced.
Hank George, FALU, CLU, FLMI, is president of Hank George, Inc., Greendale, Wis. His email address is [email protected]