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Underwriting: The Year in Review & Where We’re Headed Next

What an extraordinary year it has been for life underwriting.  We've experienced rapid and remarkable changes on a number of fronts — some positive and helpful, others more challenging — and all either accelerated by, or initiated because of, the COVID-19 pandemic.

We've seen the expansion of technological enhancements and automation of the underwriting process, helping get cases approved more quickly and with less hassle for our applicants.  Conversely, we continue to see COVID-related underwriting restrictions that sometimes affect our ability to get coverage issued, especially with older age applicants.


So what impacted underwriting in 2021? And what can we expect to see in the future?

  • COVID caused many carriers to become more conservative regarding medical impairments, maximum ratings, and ages they may consider, especially in the 70 plus age groups, with some also restricting internal retention.  A few carriers loosened their guidelines during the past year, but the vast majority remained the same. The course of COVID will define what future underwriting adjustments may be made.  However, it is expected carrier guidelines will come back to historical standards with sustained lower infection rates, and hopefully soon.
  • Accelerated underwriting is everywhere.  In a recent survey of nearly 70 carriers, 84% already have an accelerated program and the others intend to roll one out soon or are considering a program in the future.  The accelerated process has become table stakes and a "new normal" way of processing business for the industry.  As more carriers implement and become more comfortable with the accelerated process, we will continue to see increases in eligible amounts of coverage and expansion of acceptable ages in the future.
  • A number of carriers implemented online/web based insurance application completion that includes a Medical Interview/Part 2.  This is a welcome feature, allowing applicants to complete applications on their own timeline and schedule, and eliminating a carrier phone call which at times can be difficult to arrange, quite extensive, and occasionally fraught with misunderstanding between an interviewer and applicant. Industry feedback indicates more carriers are developing online applications and Part 2 completion, so expect more of these procedures to be rolled out soon.
  • Instant issue has come of age.  We've seen some innovative carriers implement fully automated instant issue platforms within the past year with good success. These platforms are "e" everything — application, interview, signatures, delivery, payment, etc. — and require limited to no human intervention while providing an end-to-end automated process.  In addition, some products being offered are non-loaded with "off the shelf" pricing.  As additional underwriting data sources, alternate data sources and digital health data connections become available, we can expect these platforms to become more common in the industry.
  • Substitution of insurance exams with traditional APS information, Electronic Health Data (patient portal, electronic medical records, electronic health records, health information exchanges, health care payers, pharmacy benefit managers) and/or alternate data sources is making its mark.  Within the past year, several carriers have implemented various processes and programs in an attempt to forgo insurance exam requirements. These have met good success for all involved — carriers, applicants and distribution.  Many carriers restrict the maximum face amounts allowed for these programs to just a few million, but some have stepped out from the pack and now allow multimillion dollar amounts up to their automatic reinsurance limits. More carriers will get on the bandwagon with these programs as they continue to establish connections to various health data sources and providers.
  • Carriers are liberalizing their recreational marijuana underwriting guidelines as additional states legalize use.  At present, recreational marijuana is legal in 18 states and the District of Columbia.  A few carriers even allow preferred best non-nicotine rates with recreational use in certain situations.  Additionally, more carriers are requiring urinalysis tests for marijuana, making it important for applicants to be candid about their use.  Some carriers can be aggressive with recreational marijuana, even if a urine result is positive for marijuana.  However, if there is unadmitted and incidentally discovered marijuana in a urine specimen, carriers often become quite conservative and may even decline coverage.  As more states legalize recreational use, we will see further liberalization and changes in marijuana use guidelines.
  • A number of carriers are testing insurance urine specimens for a wide variety of pharmaceuticals and drugs, beyond what is traditionally run on insurance labs, to determine undisclosed and/or illicit drug use, especially as it pertains to opioids, synthetic opioids and drugs of abuse. Most testing is completed on larger face amount applications, but can be requested on any application.  Applicant candor during the insurance underwriting process is critically important for everyone involved.  No one benefits from undisclosed pharmaceutical and drug use findings. Industry feedback is that more carriers may be implementing this expanded testing in the near future.
  • There has been a noticeable amount of underwriting personnel movement among carriers during the past year, especially as it relates to experienced and large case underwriting talent.  Explanations for this are what's generally heard in the job market today, including work/life balance and compensation.  In addition, some very experienced underwriters who often handle large cases retired during the past year. This has caused service and other issues to arise both industry-wide and with specific carriers. To offset some of these challenges, carriers have outsourced APS review to APS summary service providers, and at times their case review to third party underwriting services for the less impactful, flow type cases.  A few carriers have also eliminated their informal application review process, while others have placed face amount, age and other limits on what they will accept.  There is strong competition between carriers for underwriters and this will continue for the foreseeable future — especially as more underwriters reach retirement age.  Also, it's very possible there may be more carrier restrictions for underwriting options such as informal case reviews.
  • Producers can now get access to electronic health records (EHR).  While "coverage area" for EHR providers is spotty and the type and quality of information can be challenging at times, this has the potential to deliver an appreciable number of medical records to underwriting in just a few days, as opposed to the weeks it often takes to get traditional APS records.  In addition, a few APS ordering firms have teamed up with EHR service providers to get digital APS records whenever possible.  This model is essentially a one stop shop for ordering APS records:  If records are available electronically they are requested.   If not, then a traditional APS is ordered.  This model and others like it will continue to expand, especially as the coverage area for EHRs improves.

Clearly, the pandemic turned the world of life underwriting upside down, accelerating changes to accommodate rapidly evolving client behavior and preferences, volatile economic and market conditions, and dramatic technological advances.  The pace of these changes will quicken with further automation and digitalization of the underwriting, requirements-gathering and policy issue processes.  It's extremely important for you to stay informed about these and other industry trends.  As new concepts and processes are created, develop and expand, Windsor will continue to be a trusted source for information and insights dedicated to your success.

Streamlining Large Case Underwriting—A Game Change...

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Saturday, 01 October 2022
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