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Underwriting Impaired Risks: Learning How to Read

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I learned how to underwrite an impaired risk life insurance case when I was a first-year student at the University of Chicago. At the time, I didn’t even know that there was such a thing called an impaired risk, though my father, a 44-year industry veteran, underwrote them all the time. I was studying the humanities and reading, among other things, Homer’s “The Iliad.” My professor at the time, Amy Kass, taught me the most important lesson I ever learned: She taught me how to read.

The art and science of reading critically, a skill I began to learn by reading the classics, gave me the confidence and ability I needed to approach a difficult-to-underwrite insurance risk. In reading, I was taught that an individual must always ask three questions of any text:

  1. What does it say
  2. What does it mean
  3. Is it true

If you can successfully come to terms with these questions, anything you read – including fiction, non-fiction, and, in my case, medical evidence – will begin to make sense and reveal somewhat hidden or confusing meanings.

Recently, a 69-year-old male approached our firm; he had previously been declined life insurance twice in two years. Despite the two recent declines, he seemed convinced that he could be issued insurance, and asked if we could help him secure a large amount of universal life insurance for estate planning purposes.

He informed us that the declines came as a result of some alleged neurological difficulties. Specifically, he suffered from – according to his records – “slight cognitive impairments” and a “cavernous malformation” that exhibited traits of a brain hemorrhage. Given that an individual suffering from cognitive impairments and a brain infarction will have great difficulty securing insurance coverage, we were moved at how confident our client was in his health. He held fast to the notion that the evidence was being misread. To be fair, we had very little to lose in trying to get the case underwritten, short of the cost of the process and our reputation as skilled insurance producers.

At first glance, the underwriters who looked at the case interpreted the records’ wording as an automatic decline. My complete lack of medical training made me only slightly more optimistic, and we collected more than 400 pages of medical evidence from neurologists, primary care physicians, urologists, dermatologists – you name it. Our task was simple: We had to figure out what the doctors meant when they consistently referred to cognitive impairments, cavernous malformation, and hemorrhage.

Cognitive impairments and brain hemorrhages often result in straight declines for life insurance. Clearly, if we were able to get this case issued, it would require a great deal of patience and commitment.

In this particular case, we sat down with our medical director and the 400-plus pages of records, and zeroed in on the neurological reports. Three things kept coming up: mild cognitive impairment, cavernous malformation, and hemorrhage.

Question 1: What does it say?

We were comfortable with “cognitive impairment” and “hemorrhage”; “cavernous malformation,” not so much. Our medical director explained to us that a cavernous malformation was simply a malformed blood vessel, or a junction between blood vessels in the brain. He likened it to a river with straight, parallel banks that then diverge, becoming almost totally incongruous, before eventually straightening again into the original orientation. He then consulted three former colleagues of his, all neurological radiologists, and they all agreed that cavernous malformations were not uncommon, and didn’t automatically lead to any health complications. In other words, they were not a de facto predictor of future difficulties.

Question 2: What does it mean?

When a doctor looks at a cavernous malformation on an MRI, it can often seem as if there is pooling around the walls of the blood vessel. Think again of the banks of a river, where the water might pool in a small inlet and not flow as freely as the water down the center of the river. On an MRI, the curved vessel walls seem to be blurred when, in fact, they might absolutely be well defined. That pooling around vessel walls is typically, at first glance, thought to be a sign of leakage, or hemorrhage. Were we to have simply stopped there, thinking that a hemorrhage diagnosis was totally accurate and warranted, then we would have gone back to our client with the same decline he had just gotten. Thankfully, it’s not in our nature to give up that easily.

Could it be that there really wasn’t any hemorrhage at all, and the MRI results were not being read accurately?

The three neurological radiologists who our medical director consulted all led us in the same direction: The cavernous malformation didn’t necessarily show any signs of leakage or hemorrhage. The dark spots on the MRI that had clearly led to our proposed insured’s previous declinations may have simply exhibited the pooling of blood along the incongruous blood vessel borders. There was no additional evidence to suggest any bleeding, and further, no evidence that the walls of the vessels were weaker as a result of the malformation. An MRI taken years before was identical to the current film, indicating that no substantial changes had occurred – therefore, there was no hemorrhage. Comfortable with this explanation, we moved on to cognitive impairments.

In a visit to his doctor in 2008, the proposed insured admitted to having trouble sometimes remembering names and phone numbers. He also admitted that the stress of the financial difficulties of 2008 weighed heavily upon him; he was a successful investment banker, and was hit hard by the sudden volatility of the markets. In a comprehensive checkup following his neurologist visit, he was given a full neuro-psych evaluation, which he passed with flying colors. These results conflicted with his admission of slight memory issues, but the test results were conclusive.

Given the stress of the economy and his advancing age, we argued that his difficulty in remembering names and phone numbers was simply the result of stress as well as the normal progression of aging. There was no additional evidence of any cognitive impairment.

Question 3: Is it true?

After a series of discussions with our medical director, we built our case to underwriters that any previous decline was due to a misreading of evidence. Cavernous malformations were not a certain signal of weakened blood vessel walls. Apparent hemorrhages were not necessarily leakages, especially in light of no further evidence in support of that conclusion. And alleged cognitive impairments were a result of both stress and normal aging, and not really impairments at all.

We packaged the 400-plus pages of medical evidence and sent it off to the underwriters. We included a detailed letter outlining our findings, and added that we were prepared to obtain letters describing the findings from the three neurological radiologists who reviewed that evidence, as well as our medical director. More importantly, we spoke at length with the underwriters on the phone during the entire process, looking for any insight on how they would approach the evidence. By the time they received the full medical file and our explanation, they were already nodding their heads in our direction.

Underwriters, after reviewing the evidence themselves, were pleased to offer our client insurance at the standard rate, subject to a life insurance exam and full financial verification.

The final hurdle

Given the effort it took to get this medically underwritten, it was reasonable for us to hope for a simple case design – but it turns out that we had a measure of planning and design work to navigate. As a final hurdle, we worked with the estate attorney on gifting and lending strategies making use of the mid-term AFR, which was, at the time, at historic lows. The attorney was pleased that our recommendation was straight down the middle with respect to the tax code, and we were pleased that we got the case issued. But it wasn’t just any case – it was a case that we were able to issue because we approached it differently than the other guy.

It takes time and energy to underwrite life insurance, especially an impaired risk. It turned out that getting this done was all about the process of reading critically. We were committed from the beginning to truly understanding what we were facing. We tried to keep everything out in the open, both good and bad; not leave anything to question; and not accept any bad news without reading into it more carefully. This detailed, honest approach has served our firm well over the years. Certainly, not every case proves to be this difficult. But when we stayed committed to the process of knowing how to read, we were able to best serve our client.

Jonathan Novy offers securities through AXA Advisors. He can be reached at (224) 554-8034.


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