When life insurers set their underwriting requirement practices, the primary focus has always been on protective value (cost vs. benefit). In many smaller companies lacking the resources to conduct internal studies, the usual approach is to consider the practices of larger carriers and most notably those known to routinely do such studies.
Underwriter audits are indispensable resources for chief underwriters. While not the only basis for assessing performance, they are the single most significant benchmark where line underwriters are concerned. It would be essentially impossible to manage underwriters without having sufficient insight into their performance on the job.
This year’s LOMA Health Underwriting Study Group Meeting (HUSG) was held in San Antonio, Texas, on the lovely Riverwalk.
More than 100 members attended this 2 ½ day event, representing 40 Individual and Small Group carriers. About half of the meeting was spent in roundtable discussion of underwriting and other risk management issues and half the meeting was devoted to presentations.
If I were responsible for training new underwriters, the most important concept I would emphasize to them – again and again, until it was uppermost in their mind every time they looked at a case – is CONTEXT.
Hank George, FALU, CLU, FLMI On The Risk • Vol.24 N.4 2008
This essay is one underwriter’s observations regarding aspects of the Association of Home Ofﬁce Underwriters (AHOU) which may be deemed worthy of rethinking and, if so, perhaps modifying on some basis, now or in the future. A wide range of topics is discussed, with the sole purpose being to offer up thoughts for consideration by AHOU members. The author hopes what is said here will be received in the spirit intended.
Just a year ago, one would have had comparatively little incentive to write this commentary…which is perhaps the best way of saying that our underwriting environment is now changing dramatically due to the confluence of a number of factors.
“Faster, cheaper, better” has been the mantra of life insurer senior management for years now where risk appraisal in concerned. This has propelled teleunderwriting into the forefront as our paradigm of choice and also fueled the embrace of rapid-acquisition assets like Rx profiles and MVRs in America.
Unlike “Terminator” movies, the machines in question here are the so-called “underwriting engines.” These “straight-through processors” have been around for years. Yet despite smashing success in the United Kingdom and other markets, they have languished in North America.
What “he” has is the incredibly untimely capacity to rapaciously rob your company of its future…and compelling evidence suggests this is indeed what is coming to pass across the global life and health industry.
This essay will explore the pathogenesis of “his” ways and the manifold prices your company will pay for mortgaging its tomorrows by vogue expediency.
There was a posting recently at lifeunderwriting.com wherein the underwriter bemoaned the fact that his company would not fund his enrollment, and that of his peers in the department, in the State of the Art™ Continuing Education Program.
This is a classic case of missing the forest for the trees, as they say. And not just because it happens to focus on the education program into which I and my colleagues at SelectX-UK have invested so much of our energy and devotion.
While we underwriters do not get directly involved in the sales process for the most part, there are likely some advantages to accrue to us if we suggest some “angles,” if you will, that help our producers make the value of CI policy ownership clear to prospective customers.
This is one approach that I think has merit, especially in the USA.
A friend from abroad said to me a few years ago that critical illness insurance would not be much of a seller in the US market.
For much of this underwriter’s 30 years of practice, he had to endure being denounced as head of “the sales prevention department” by angry producers who tired of waiting weeks (if not months) for a “thumbs up” on new business.
Those days will soon be gone…forever.
Gone, that is, if life insurers take the plunge and embrace a new model for risk appraisal that radically transforms the process.
Teleunderwriting embraces multitudes. It is, at the same time, both a technical process that reconfigures day-to-day home office underwriting and a dynamic process that affects every aspect of how we select risks.
Before I delve into this essay, four observations are necessary for perspective.
My apologies to the spirit of Ray Bradbury for appropriating the title of one of his many stellar works of fiction (more than a few of which I confess to having devoured in my youth).
I put quotation marks around “wicked” to emphasize that this loaded word is being used strictly in the figurative sense. I imply no personal criticism of those who may advocate the practice about to be described. The practice itself, on the other hand, has odious implications which, if only in my view, need to be aired out and further debated lest they be embraced prematurely in risk appraisal.
I put a question mark at the end of the title because the status of the matter at issue remains uncertain. Is it already here? Should we expect its landfall soon? Or, does it remain purely theoretical at this writing?
Because of the importance of addressing this phenomenon early on, it is necessary to work off of a number of assumptions. If, as it turns out, some of these assumptions are in error, then perhaps at least a portion of the concern expressed here will be mitigated accordingly.
Hank George & Tia Goss Sawhney Contingencies • Nov/Dec 2008
The venerable life insurance industry awoke one morning to find itself transformed into a financial services industry. Unfortunately, no one thought to tell those who stand astride the flow of new premium assuring that the ratio of actual-to-expected mortality remains far less than one. In other words, underwriting was—and to a great extent still is—out of step with the financial services concept.
In the November, 2007 issue of General Re Life and Health’s Risk Insights publication there was an article by Dave Nicholas, Underwriting Manager in the United Kingdom, titled “Using the Telephone as an Underwriting Tool.”
In other words, teleunderwriting.
I discovered this piece a bit belatedly and then learned of a more recent piece by Dave in the March, 2008 issue of this esteemed periodical.
After reading both carefully, I e-mailed Dave and asked if he’d mind me writing about what he said, adding my own observations and comments.
Dave had no objections whatsoever (thank you, my friend!)…
“…every dollar spent on training and development per employee results in an increase of $168 in revenue per employee.”
Jennifer C. Rankin
LOMA Resource magazine
The issue of underwriter education has had a renaissance of sorts since the tedious years of the 1990s. Over that interval, this subject was all but anathema, given the priorities and realities of those times.
At a recent lecture I did for a state underwriting association, a management underwriter for a P&C-based life insurer mentioned her continuing frustrations in trying to convince their sales representatives (once again, I use this as a synonym for agent, broker, intermediary, etc.) to accept teleunderwriting.
In this case…and so many others…the nidus for field resistance was their “concern” for “loss of control” over their clients.
The “control” myth had reared its predictable head once again!
In this final essay in our teleunderwriting series, we will focus on how insurers can capitalize on the introduction of teleunderwriting to make important changes in underwriting practices. It is imperative that insurers use this window of opportunity wisely for two reasons:
It is open to you by virtue of the huge positive impact teleunderwriting will have on turnaround time for your sales force. They will be excited about this and other payoffs to them from this new process and you can leverage this to your advantage.
Almost every company in the industry has changes that need to be made regarding requirements and other practices which harmonize with teleunderwriting and/or bring advantages in other ways. Making them invariably means treading lightly. Perhaps less so in this context than at any other point.
Most arguments advanced in support of embracing teleunderwriting have to do with over- all corporate and underwriting-specific objectives.
We usually don’t think of teleunderwriting in terms of its broad contribution to assuaging the concerns of those who sell our products (thus, giving us a reason for being on the payroll!).
This essay is a direct result of a survey report summary, published in the November, 2007 issue of Insurance Marketing. This high-quality monthly circulates widely within the North American agent/ broker community.
We have just completed a survey of 18 American life companies currently engaged in teleunderwriting. The findings should be of interest to all life and health insurers using or considering teleunderwriting. Therefore, this essay will review the results of that survey, with added commentary…as readers have no doubt come to expect from this underwriter!
Let me clarify that by “salesperson” I mean “producers,” (the most common term of reference in the USA), brokers, intermediaries, advisors, agents…or whatever other (polite) term you prefer.
Some years ago, I was asked to speak in the Canadian Province of Alberta to a meeting of producers. One of my topics was teleunderwriting.
After I presented the teleunderwriting concept… they booed me! Thank God they didn’t have empty beer bottles in their hands!
Why did they react so negatively?
They were afraid – no, make that dead on certain – that teleunderwriting would encroach on their relationships with their clients, putting them at risk for losing the business (and, depending on the client, potentially a great deal more business) due to head office delays, insensitivities and nonspecific blundering.
Were their fears legitimate?
At face value, you bet they are!
If I were a producer, I’m certain I would have had the same apprehensions when hearing that head office personnel – or worse, strangers (outsourced providers) – were going to deal directly with the source of my livelihood, before the premium (and my commission) was paid!
In clinical medicine, triage is the process by which patients – typically in emergency care settings – are divided into groups based on the urgency of their need for treatment. For example, if you have a bad cold and I have a bleeding head wound…and we both arrive at the E.R. at the same time, you will be watching TV (bored out of your mind) while I am treated first.
Triage is also a fact of life in underwriting, but in a different way.
In all modes of underwriting, we reach several points in the appraisal process where we may be positioned to make the fundamental triage decision: can I take action with what I have or do I need more information?
In 2009, at least one U.S. insurer will celebrate 20 years of teleunderwriting. A handful more will follow in the ensuing years…but the fact is that the vast majority of insurers now doing teleunderwriting started after the turn of the millennium and many are still sorting their way through issues that need to be addressed to optimize success.
Hank George, FALU, CLU, FLMI April, 2007 • Teleunderwriting Essay 3
I’ve worked with, heard about and/or seen dozens of teleunderwriting operations in North America and the United Kingdom.
And the one thing that stands out about them is that NO TWO ARE ALIKE.
This, if you will, is the beauty of teleunderwriting.
It is an approach to gathering risk information that is 100% customizeable to the specific needs and circumstances of each company. No master plan must be religiously adhered to. This is not a “one size fits all” undertaking! Therefore, in this essay we will look at key factors that influence how any given insurer configures teleunderwriting to fit its unique needs and circumstances.
In this underwriter’s view, two main issues that must be addressed when launching an effort to consider and – if wisdom and the desire to remain competitive prevail – embrace teleunderwriting:
Will teleinterviewing be “dropped” into your existing new business process, or, will your entire process be scrutinized, and, where necessary, re-engineered as part of this undertaking?
Will you choose to be redundant in the gathering of risk information from proposed insureds, or, will you have the vision (and the courage, in many cases) to recognize the perils of redundancy, and then eliminate this pathology from your process?
“It all started in a little 5,000 watt station in Fresno.”
- Ted Baxter
For those of you who remember the Mary Tyler Moore TV show from the 1970s, the name Ted Baxter should recall to mind that pompous evening news anchorman who was forever incurring the wrath of station manager Lou Grant!
Best as this underwriter can determine, teleunderwriting – unlike Ted’s mythical career as a bumbling TV personality – did not begin in a radio station or in Fresno, California…nor did Ted have anything to do with it (which is just as well for the sake of this incredible process which is changing the face of mortality and morbidity risk assessment forever!).
Circulatory disease is the #1 cause of excess mortality and morbidity in industrialized nations, worldwide. Thus, life and health insurers place their underwriting emphasis in this domain of risk.
Currently, most insurers continue to rely on screening and reflexive tests that are inferior to more modern alternatives. As the industry continues to sort its priorities and identify itself within the realm of “financial services,” the need for significant – and now readily feasible – changes in this regard becomes clear.
Hank George, FALU, CLU, FLMI The National Underwriter • July 2005
This is a message for all senior executives, chief marketing officers, sales VPs, agency managers, brokers and agents on the subject of teleunderwriting. Those who take a few moments to read it will be empowered to change their companies in ways that are certain to pay back handsomely, both immediately and in the years ahead.
At the last meeting of the Underwriting Vision Group, this underwriter, as founder and chair, asked one of the members to “describe the impact teleunderwriting has had on your company.”
The respondent is VP of Underwriting at a prominent life insurer. He is one of a dozen who serve on this issue-focused underwriting discussion group.
We know from this exclamation and also from countless statements by new business executives that teleunderwriting has been the greatest innovation in the history of life and health underwriting.
This essay is directed at answering one imperative question that is seldom asked and rarely comment upon: what are the implications of teleunderwriting for producers?
An insidious crisis is quietly jeopardizing the future of life and health insurance.
We are permitting ourselves to "dumb down" as regards prowess and savvy in the art and science of risk selection.
On visible aspect of this has been intensive cost-cutting efforts of recent vintage. CFOs have been quick to cut "non-essential" travel, as well as spending for educational purposes. While everyone appreciates the need for prudent spending, these well-intentioned individuals are simply "picking off the low-hanging fruit." By doing so, they are unwittingly closing off essential avenues to maintaining technical proficiency. Sacrificing access to vital knowledge in these times of great and rapid change is the quintessence of penny-wise/pound-foolish thinking.
A 2004 LIMRA Research Report (Insights Into Strengthening Producer Relationships) surveyed of a cross-section of successful agents and brokers and determined that "service and support" was the second biggest reason why they changed carriers.
I would like to be able to recount to you how a beautiful lady, in a streaming white gown, floated over this underwriter’s bed one evening and said, “build it and they will come” (or something to that effect).
Alas, it was words of inspiration from eminent consulting actuary Jack Bragg in an essay in The National Underwriter (September, 2000) that jumpstarted my awareness of the incredible and — as yet overwhelmingly untapped — potential of critical illness (CI) insurance in our marketplace.
“…many adults currently choose CAM therapies to treat their most serious medical problems.”
David M. Eisenberg, MD,
Harvard University Annals of Internal Medicine
CAM is the new acronym for complementary and alternative medicine. Which, in turn, speaks to a broad array of therapeutic interventions—some ancient, others ultra-modern—standing at the gates of conventional medicine and finally being heard, as in:
Increasing the prevalence of their collective use by 25 percent in the final decade of the previous century.
Escalating the number of visits to their sundry practitioners over the same interval from 427 million to 629 million (an imposing number challenging primary care medicine).
Jacking up net expenditures for their goods and services by a staggering 45 percent to a total of $21 billion and climbing.
Hank George, FLMI, FALU, CLU RESOURCE • March 2003
In North America, life and health risk management is undergoing a dramatic transformation.
The new millennium brought with it great opportunities and unique challenges for our industry. This article will focus on those aspects of opportunity and challenge that have come together to catalyze what can only be described as the ongoing “metamorphosis” of how North American life and health insurers appraise insurability and process new business.
“How many of you know what critical illness insurance is?” A scattering of hands, slowly ascending, as if to say,
“Well, maybe…a little.”
My next question, “What would you say if I told you it was destined for stardom? To be America’s next big insurance product?” A wall of silence, less disconcerting only for the generalized non-defensive body language! Like I said, this essay is just a bit overdue.