Context: The #1 Consideration in Underwriting

Hank George, FALU, CLU, FLMI
March 1, 2010

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.

CONTEXT is defined as all of the factors which come together to put a given impairment, risk-related scenario or individual unfavorable finding into full insurability perspective.

How well I remember my baptism into the reality of CONTEXT in underwriting!

A brand new life underwriter barely out of initial training, I got a case back from a medical director who had interpreted an ECG which had been sent unanalyzed with the attending physician’s medical records. The final assessment by our medical director read: “deep Q waves in leads II, III and aVF consistent with a prior inferior wall MI.”

These ominous findings seemed to confer little “wiggle room” in terms of necessary final action…

…that is, until I realized the key aspect of CONTEXT on this case:

The proposed insured was a 16 year old boy!

A HUGE 16 year old boy, whose first and only ECG had been done in conjunction with trying out for his high school football team (no doubt as an offensive lineman, not a wide receiver).

Had he sustained an undisclosed MI?

Yeah, right…

…considering that his records stated that his assessment for participation in this physically demanding sport was “negative” and he was cleared to play.

Yes, this is a blatantly obvious example of a single contextual factor resulting in a 180° change in the risk implications of an otherwise disturbing ECG interpretation. In the real world of day-to-day underwriting, however, few cases are this cut and dried because the interplay of contextual factors is so often multifactorial and thus far more challenging.

Why is CONTEXT so important?

Because failure to recognize, understand and use CONTEXT leads to:

• Ordering excessive requirements, thereby sometimes delaying final action while driving up new business acquisition costs.
• Taking inappropriately favorable actions, resulting in excess mortality and morbidity, while promoting antiselection by encouraging the recipient (of the windfall) to apply for additional coverage.
• Taking inappropriately unfavorable actions, resulting in loss of good business, triggering a torrent of indignation from producers and sometimes leading to business being sent elsewhere.

When CONTEXT is ignored and tunnel vision carries the day, all too often there are consequences impacting one or more parties to the transaction…

…consequences which would not have occurred if the underwriter had the skills, knowledge, patience – and time – to take a step back and put the seemingly adverse or (in many cases) deceptively favorable finding(s) in contextual perspective.

What 10 factors come together to impact the ability of underwriters to fully recognize, adequately evaluate and optimally apply all salient contextual factors on any given case?

• Who trained them
• How they were trained
• Whether or not they received sufficient post-training mentoring
• Who provided that mentoring
• Who audits them
• The relative impact accorded productivity (volume of cases underwritten) vs. quality of decision-making in the audit, and thus how audit feedback is received and processed by the underwriter
• The nature and extent of continuing education for underwriters
• The quality of the underwriting manual, primarily in terms of highlighting and explaining BEST case, WORST case and RED FLAG criteria
• Whether underwriting practices are represented to be RULES vs. GUIDELINES

The underwriter’s inherent ability to – quite literally – distinguish “the forest from the trees”!

As you see, there are many ways in which the capacity of an underwriter to appreciate and use CONTEXT is shaped initially and then on an on-going basis throughout his/her career.

One scenario where CONTEXT is absolutely crucial is in the analysis of diagnostic test results.

Considering the demands typically placed on underwriters these days to satisfy productivity expectations, coupled with the priority (appropriately) given to dealing with producers’ concerns, it is easy to fall into the convenient trap of zeroing in on the “bottom line” – the final cryptic analysis of a test – without reading the “fine print.”

For example, consider the 55 year old male with a modestly unfavorable CV risk profile and a recent history of atypical chest pain who had a stress ECG. The bottom line analysis of the ECG tracings reads “no evidence of ischemia – negative test.”

Does this forgive the chest pain and justify cutting back a bit on the total debits for the adverse risk factors?

Often times the answer is YES…that is, unless the “negative test” conclusion is mitigated – if not dismissible outright – by a CONTEXT which puts this ostensibly favorable assessment in a far different light.

Was the test done chemically rather than by exercising on a treadmill; if it was, why?

Was the applicant’s heart rate increase blunted (chronotropic incompetence); if so, was he taking a beta-blocker at the time?

Did he stop exercising after attaining < 5 METS; conversely, did he attain a high level of performance consistent with outstanding cardiopulmonary fitness?

Did his systolic BP fail to increase or drop suddenly during exercise?

Did his diastolic BP rise inappropriately with exercise?

Did PVCs develop during exercise or in recovery; if they did, what were their features?

Did a transient left bundle branch block occur during exercise?

Did symptoms develop which led to stopping the test prematurely?

Was his post-exercise heart rate recovery delayed?

All of these factors come into play every time we evaluate any CV stress (exercise or chemical) test.

If significantly adverse, they may override any perception that the absence of ECG ischemia is a favorable consideration.

If notably favorable, they could embellish the desirable insurability implications of a “negative” test.

Tunnel vision – in this situation, reading only the final test interpretation – is one of the most common potentially disastrous case CONTEXT blunders in underwriting.

Another prevalent milieu where CONTEXT comes into play is the analysis of lab test results.

Let’s say we have a 31 year old female insurance seeker whose blood profile reveals a 2.5-fold elevation of ALT, accompanied by a GGT that is 1.7 times normal and high-normal AST.

Other than a remote history of surgery for polycystic ovary syndrome (PCOS), her medical history is clear. With a BMI of 32.5, she is at the cusp of a rating for obesity…but her blood pressure averages 118/72, the TC: HDL-C ratio (210 to 70) is a desirable 3:1 and her fasting glucose is within normal limits at 96.

All of the information we have – considered in CONTEXT – points to what is by far the most probable cause of the elevated liver enzymes. Considering the obesity, history of PCOS and high-normal fasting glucose, these elevated liver enzymes are almost certainly due to nonalcoholic fatty liver disease (NAFLD).

Most NAFLD cases consist only of simple fatty liver…but 20% are nonalcoholic steatohepatitis (NASH), and this subset is not without risk significance, especially in such a young adult.

Given that GGT is elevated, the odds of NASH are significantly increased.

Alcohol abuse is far down the list of probabilities. Fact is, if one were to require further testing – which this underwriter would not – the only defensible choice would be hepatitis C antibodies.

How many American underwriters would order a CDT test to vainly try to ascertain if these elevated liver enzymes were a harbinger of alcohol abuse?

Quite a few, actually, if you look at the criteria for reflexive CDT use acknowledged by respondents in the 2007 Underwriting Requirements Study!

In this CONTEXT, a CDT test will likely do more harm than merely adding the cost of underwriting the case.

Why?

Because a negative CDT – by far the most likely result - will usually result in the liver enzyme elevations being ignored when final action is taken.

Even if alcohol abuse were in play here, how helpful would CDT be in this CONTEXT when we know that 4 times out of 5 CDT will be false-negative in heavy drinkers who present with a high GGT?

Bottom line: this 31 year old obese female is at high risk for both diabetes and the so-called metabolic syndrome. Furthermore, these liver enzyme findings, clinically speaking, would justify both hepatic ultrasonography (which credibly identifies fatty liver but cannot distinguish between simple steatosis and NASH) and further liver enzyme monitoring.

Another setting where CONTEXT has major implications is the analysis of pathology reports. In this setting, full appreciation of CONTEXT may be stymied by manual guidelines which fail to consider key findings bearing on insurability.

Cases of “thin” melanoma – defined as < 1.0 mm in measured thickness – are typically underwritten aggressively because most of them are cured by surgical excision.

Consider a 63 year old man who had a 0.73 mm melanoma removed from his upper back 15 months ago. The lesion was said to be Level III and there was no mention of ulceration (the other pathological finding typically considered in prevailing underwriting guidelines).

Do other pathology considerations matter…or can we take action based on these three elements (thickness, level and ostensible absence of ulceration)?

An argument could be made for asking a few more questions before we rush to make a highly competitive offer in hopes of “winning” this case in competitive brokerage setting:

Does the absence of mention of ulceration mean ulceration is absent? No. Only a statement that “ulceration is not present” means (almost always) that ulceration is absent.

Was there extensive regression, consistent with this melanoma having once been much larger and deeper than it was when it was excised?

Did the pathologist mention the presence of mitoses; if so, were mitotic figures numerous?

Was the growth pattern wholly radial or was there a pronounced vertical component?

Did the proposed insured have a sentinel lymph node biopsy? The underwriter would doubtlessly catch any reference to a positive biopsy…but is there any significance to whether or not a SLN biopsy was done in the CONTEXT of a trunk melanoma in a 63 year old?

Has the applicant been faithful in showing up for interim appointments with the physician caring for him in this setting?

Thin melanomas with 100% favorable features fare far differently from those that have disconcerting “flyspecks.”

And the CONTEXT difference-makers here may not – regrettably and avoidably – even be known to the underwriter.

What can you do to maximize the odds that your underwriters deftly bring CONTEXT to bear on a consistent basis?

Drive home the concept relentlessly during their training and on-going mentoring as junior underwriters…making sure as you do so that their mentors are sufficiently adept in this regard.

Make abundant use of case clinics for underwriters at ALL levels of experience.

Use genuinely capable auditors who qualify by more than tenure alone, give them adequate time to probe CONTEXT considerations in cases where subpar decisions were made and then present the feedback in a way that reinforces the importance of CONTEXT.

Make it clear that your underwriting practices are guidelines, not immutable rules cast in concrete…and that the underwriter’s accountability is to make the best possible decision with all the facts at hand.

Rethink your criteria for reflexive testing, make appropriate evidence-based changes including carefully scrutinizing the appropriateness of any “automatic flexing” directions arranged with your lab; then, do periodic audits specifically looking at how often, why and by whom elective reflexive tests are ordered.

Make sure your manual has comprehensive contemporary constructs for BEST case, WORST case and RED FLAG criteria on every impairment.

Invest in high quality continuing education – whether home-grown or externally acquired – because this is your ultimate “ace in the hole” where CONTEXT-based underwriting is concerned.

After auditing untold thousands of cases, I say without the slightest hesitation that the absence of CONTEXT-based risk analysis is the Achilles heel of adverse mortality and morbidity…

…as well as a factor to reckon with where wastage of good business, producer disaffection, underwriting delays and excessive new business acquisition costs are concerned.

The good news?

Unlike many other knotty issues you must deal with, assuring high caliber CONTEXT-based underwriting is one you can get your arms around!