What You Need to Know
- Simplified underwriting can speed the application process up.
- Full underwriting can be fast, too.
- Some clients may get better, cheaper coverage if they go with full underwriting.
Your clients’ time is precious. When juggling careers, families, friends and hobbies — all in the midst of a pandemic — there isn’t a lot of extra time available.
So, when you’re helping clients choose the right financial protections for themselves and their families, they expect swift insights and actions. The rise of fintech companies, from digital consumer banks to tech-based mortgage lenders, has certainly helped make their (and your) lives easier.
Life insurance has taken longer than most other financial services industries to modernize and speed up. The good news, however, is that digital life insurance options are rapidly increasing, providing consumers with more choices. Many of these insurtechs have now also expanded on their original direct-to-consumer capabilities to partner with agents and advisors, in order to serve shared clients (not to mention finally give advisors a response to clients’ time demands).
However, as digital life insurance becomes a primary source for clients’ life insurance needs, it’s important to remind clients that finding the right coverage is about more than getting the fastest available offer. Understanding the different underwriting approaches for each of these products is critical, as it can impact what policies and protections are available to clients, and how much they’ll have to pay to get coverage.
The Digital Underwriting Paths
There are two types of underwriting pathways for digital life insurance: fully underwritten and simplified. (There is actually a third type, guaranteed issue, but let’s put that aside for now, given that guaranteed issue life insurance usually isn’t used as a long-term financial planning tool.)
Organizations with fully underwritten strategies and simplified strategies both have radically sped up the timeline for getting coverage.
At the most basic level, a fully underwritten policy is priced assuming the insurer is covering individualized risks based on a comprehensive medical history. This strategy requires an applicant to complete a full medical history. That information is then supplemented with third-party data, to evaluate whether the insurer can make an instant offer.
If yes, a policy can be issued within minutes.
If no, but a client might still qualify for coverage based on additional information, a medical exam might be requested to help get that policyholder covered. This might lead to going to a clinic to get a blood draw or provide a urine sample.