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Life Health > Life Insurance

Substandard Ratings: Going the Extra Mile

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Underwriting imageIn most life insurance agents’ careers, it does not take long for the agent to submit a life insurance application that is approved with a substandard rating. When prospective policy owners learn that their life insurance has been issued with an additional premium to address their increased risk factors, reactions can include unsurprised acceptance, disbelief and even anger.

Most experienced agents have learned to anticipate a substandard issue case and begin to prepare their prospects for the likelihood of a substandard rating in advance of the application process. Preparing a prospect in advance establishes realistic expectations, prevents wounded feelings and is a mark of professionalism.

Occasionally, even the most seasoned agent is surprised by an adverse underwriting decision and must engage a prospect with disappointing news. Sometimes, when an agent explains that a substandard rating is being assessed due to information uncovered during the underwriting process, the prospect isn’t surprised and may even admit that they “forgot” to mention a particular element of health history or avocation.

Other times, prospects will vehemently protest the underwriting findings. It can be difficult to respond to these protests, since regulations with regard to privacy often prevent agents from fully knowing why a substandard rating has been assessed.

While prospects’ protests sometimes stem from a denial of fact, it is important that an agent take the time to listen to their prospects to ascertain whether an error possibly occurred in the underwriting process. Remember, underwriters make their decisions based on information obtained from several sources, including interviews, lab results, the Medical Information Bureau and attending physician statements. If an underwriter is supplied with errant data, they will likely come to an errant conclusion. Taking the time to do a little follow-up may make all the difference.

Mistakes happen

In 2009, we placed a mildly rated case that we presumed was due to the client’s build. When we placed the case, we explained to the insured that sometimes we have been able to improve an insured’s rating in the future if they are able to correct the issue that caused a rating.

Little did we know the positive influence our conversation would have on our policyholder! He joined a gym, hired a trainer, adjusted his diet and embarked on a life-changing course of action to improve his health.

After a year of sustained exercise and weight loss, he applied to have his substandard rating removed. We were shocked when we learned that the rating had been assessed due to a statement in the insured’s medical records that he was a “known diabetic.” When we explained our findings to the insured, he was not only surprised, but angry, explaining that he’d met regularly with his physician for years and never been told he was a diabetic. In short, he was convinced an error had been made, and he was willing to prove it.

After a discussion with the underwriter, we were able to learn which of the insured’s physicians made the diabetic statement, which allowed the insured to ask why the statement appeared in his records. When the physician reviewed the records, he noted that an error had been made by the typist who transcribes the physician’s verbal notes to a written format. The doctor wrote a letter explaining that he had dictated that our insured was a “non-diabetic” but the typist mistakenly entered “known diabetic” in the record.

Once the insured submitted the physician’s correction letter along with lab results and an additional letter from his regular physician confirming that there was no history of diabetes, the substandard rating was removed.

Neutrality is key

If an agent feels that an underwriting error may have been made, it is vital that the agent only communicate the process that needs to be followed to investigate the error. The agent must not indicate that there will be a resolution or that he can influence the outcome of the investigation.

The insured should be prepared to provide a written statement explaining why he feels an error has been made and be prepared to provide overwhelmingly obvious proof that an error occurred.

During the investigation, the agent must remain neutral to the outcome. The agent’s role is to clearly explain what information is required of the insured by the insurance company and to provide accurate information to the insurance company on behalf of the insured. Remember: the agent has an equal and ethical obligation to the insured and the insurance company.

Hasley Bio PicJames M. Hasley, CFP, CLU, ChFC, is a managing partner at Elite Financial Partners in Maitland, Fla. He earned a realLIFEstories Client Service Award in 2010 from the LIFE Foundation. Contact him at [email protected] or at (407) 622-8700.


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