What Are Underwriting Pros Talking About Today?

Throughout my career I've had the good fortune to be associated with a number of individuals and organizations that move and shake the life insurance underwriting profession. They include many industry thought-leaders – among them are chief underwriters, actuaries, medical directors, reinsurance leaders, insurance lab and exam leaders, data providers and others. They represent a wealth of knowledge and insight about the state of the underwriting profession, always looking towards what's impacting the industry today and what they expect to impact the industry tomorrow.  So what's at the top of their lists?  

 Accelerating into the Future

Accelerated Underwriting – also referred to as "fluidless underwriting" and by other names - continues to be the rage, with most major carriers offering some version of an accelerated program today. (related: Accelerated Underwriting into the Future). These programs provide an applicant—within certain face amount, age and underwriting class limitations—the opportunity to be approved and issued coverage without an insurance exam and lab. It's a win-win when it works, and it works a decent percentage of the time with many applicants.

Because the approval of coverage is primarily based upon applicant disclosure, along with information from various databases and algorithmic underwriting tools, carriers are concerned about applicant nondisclosure with these programs. Key items of concern include fudging height and weight results, inaccurately reporting smoking status (one lab reports over 20% of applicants lie about smoker status) and other medical and nonmedical issues.

To prevent nondisclosure and misrepresentation, many carriers are doing some form of program holdout for applicants who would ordinarily qualify, and/or doing post-issue medical record ordering and rechecking various databases for misrepresentation.

At present most of these programs will consider face amounts up to $1 million. However, as more carrier experience is gained and more predictive data sources and modeling are discovered, face amounts may go up considerably—perhaps in the range of $5 million or so—along with a broadening of qualifying underwriting classes.

 The Game Changer

An applicant's medical records typically provide the best and most meaningful information carriers use in underwriting. However, because of both cost and inherent time delays, carriers will often forgo medical records if possible and base decisions on applicant disclosure, paramedical exam and lab results, and other things. Enter: Electronic Health Records (EHRs).

EHRs are being called the game changer. Today every physician's office and medical care provider must maintain their patient's medical records in electronic form. While the content of the electronic record varies, the key point is medical information may be transmitted by electronic means quickly. However, as is often the case, this is easier said than done.

At present many medical providers lack interoperability, which is defined as the ability of a computer system or software to exchange and make use of information from other sources, and the ability of groups to operate in conjunction with one another. So while medical sources may be able to transfer records quickly and easily within their own system, the same cannot be said for those requesting records that reside outside their system.

The life industry continues to work to find ways to tap into EHRs, and it may take about 3 to 5 years before a broad scale workable solution is found. When it is, it may usher in an entirely new way of underwriting—in terms of speed and accuracy of underwriting, and by potentially allowing certain applicants, even on the largest cases, to forgo routine age/amount underwriting requirements to qualify for coverage. (related: Underwriting - Where are We Today? Where are We Headed?).

Reefer Madness

While underwriting the use of marijuana for medical purposes has been challenging for carriers, they are currently wrestling with the legalization of recreational marijuana. Currently 9 states and the District of Columbia allow recreational use. (related: New Opportunities in Marijuana Underwriting).

This is an evolving area, where a number of carriers are treating recreational use conservatively, accepting an applicant's limited use and at the same time excluding best underwriting classes and applying smoker rates. But  more and more carriers are opening up to recreational use and beginning to provide best underwriting classes and nonsmoker rates. The key in all of this is that an applicant must disclose marijuana use at time of the application or exam. Some carriers are testing for marijuana in urine specimens, and if they discover THC they may decline coverage altogether for lack of candor.

In addition, there are a few carriers that will consider personal coverage on applicants who work in the marijuana industry.

 Some Lab Testing is Good.  More is Better?

Carriers are testing insurance lab specimens for more and more things today. And some testing has been helpful, such as NT-proBNP which has allowed carriers to forgo pesky EKGs (as an age/amount underwriting requirement) that are often incorrectly done by paramedical examiners and which may cause potential difficulty in securing coverage

In addition to THC testing, some other tests being completed today for carriers on a limited but expanding basis are blood alcohol, opioids and hemoglobin (Hgb). While it's obvious as to why blood alcohol and opioids are being tested, Hgb is being tested on older age applicants to determine whether they are anemic. Anemia in the older ages, usually defined as age 70 and up for most carriers, is typically troublesome and may indicate an underlying serious disorder.

CDT, an alcohol marker, is another lab test to be aware of. CDT measures the volume of alcohol consumed over an extended period of time, and typically becomes positive (abnormal) when one consumes the equivalent of 4 or more drinks per day over an extended period of time, such as 3 to 4 weeks. Some carriers reflex, or will request this test be automatically completed by the insurance lab, if an applicant's HDL cholesterol is elevated beyond a certain level, and/or an applicant's lab shows elevated liver enzymes. Carriers may also request this test if they suspect alcohol overuse after reviewing an applicant's medical records.

The insurance labs will say CDT results are extremely reliable for their ability to detect excess alcohol use. However, I've seen young females who routinely exercise at a fairly high level turn up a positive CDT result with no other apparent risk factors for excess alcohol use. There have been similar situations involving male applicants. It is important for agents to be aware of this test and to take note of when testing is completed, since an abnormal result may be a surprise to everyone and will derail an otherwise great case.

 Genetic Truth & Consequences

Genetic testing scares the life industry, and this fear is well-founded.  As genetic testing becomes more accessible to the average person via mail order and other means (i.e. direct to consumer), and as the cost of testing becomes more affordable, potential applicants may get tested and apply for coverage knowing that they have a genetic propensity to contract a dread disease— without disclosing the test results to an insurance company.  Actuaries and others will say it only takes a few extra early deaths per thousand to upset mortality results, and this has the potential to do just that.

Compounding this issue is the Interstate Compact. The Compact, comprised of over 40 states, prohibits carriers from asking an applicant whether a medical test was completed in the last few years unless the application further asks if the test was "ordered by a health care provider."  Essentially this prohibits carriers from asking applicants about any direct to consumer testing.

The reality is that only some genetic test results are 100% causal, meaning that test results indicate an individual has complete certainty of contracting a disease.  It typically takes a few other things, environmental and otherwise, to trigger the disease process.  However, carriers for good reason still want to know if testing was completed and if so, its results.  I've personally seen applicants with abnormal genetic test results found in their medical records be offered coverage on favorable terms if they had acceptable follow up testing to monitor whether disease was present or not

Carriers and reinsurers are also investigating various genetic testing models to determine how these may provide insights into disease and longevity.

  Brain Drain

Over the next 5 years it is estimated that a significant number of home office underwriters and medical directors will be retiring.  This will impact everyone involved as talent and institutional knowledge exits the industry. Many carriers have yet to come to grips with this reality, as they deal with data analytics, big data and other issues emerging in the industry today. However, this will have an impact on everyone in the life insurance manufacturing and delivery process, and is something to watch as time goes on.

  Looking Ahead

Whether it's accelerated underwriting, EHRs, recreational marijuana, lab testing, genetics, the exit of industry talent, or something else, it's extremely important to understand the impact these things have on our business. All of these changes are progressing toward more efficient underwriting and product pricing, combined with expedited delivery and increased agent and customer satisfaction. At Windsor, we have our finger on the pulse of the industry to keep you apprised of any changes. We will continue to update you as additional information develops. The next five to ten years promise to be very interesting for everyone in the life insurance profession.

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