Synergy: Seizing the Opportunity Afforded by Teleundewriting to Make Strategic Changes in Your Underwriting Practices
Hank George, FALU, CLU, FLMI
January, 2008 • Teleunderwrtiting Essay 12
Introduction
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.
Why are strategic changes in requirements essential when implementing teleunderwriting?
Teleunderwriting is intended to expedite the underwriting of countless cases which previously languished for want of medical records.
If one is going to go this far to reduce application- to-issue processing, why not make additional complementary changes aimed at achieving the same result?
Some of the options we propose in this regard are only available to insurers in the United States. In some cases, this may change over time. Other options are accessible worldwide…but not necessarily used in an optimal fashion.
There are requirements to consider either adding or expanding your use of because they have a significant impact on turnaround time. There are others which act in the same manner as medical records to impede and delay the process. We need to identify each group of requirements.
Requirements which piggyback on teleunderwriting to expedite underwriting action
Motor Vehicle Records (MVRs)
Available in the US from most states. They are rapidly acquired at low cost. The 2007 Underwriting Requirements Survey done by our company revealed that many carriers make inadequate use of MVRs. An argument could be fashioned for using them at all ages in both genders at a reasonably low sum-insured threshold. But they are most valuable in males under age 30 and in both genders at ages 65 and older for very different reasons.
Rx Profiles
Which as every US insurer should know are reports available from several service providers, showing key information about prescriptions filled by applicants over a fixed period of time (that interval determined by the insurer). It is becoming clear that their value is much greater than originally thought, especially as 70% or more of mainstream applicants will have records that we can access. We encourage all US insurers to take advantage of the white paper we did on this subject. It is free and posted here for registered users. We believe that Rx profiling is destined to become a routine age/amount screening requirement used at least as extensively as laboratory testing in the next 2-3 years.
Oral fluid
Also known (incorrectly) as “saliva testing.” This is a very attractive alternative to blood testing at ages 40 and under because, (A) it includes the major elements related to young adult mortality (HIV, drug use, tobacco/nicotine ingestion), (B) should be embellished with hepatitis C screening in due course, and (C) specimens can be readily collected by sales people (thus reducing turnaround time as compared to blood and urine, which must be paramedically collected).
Skin Cholesterol
Properly called “skin sterol” and soon to be available under the brand name PREVU.
This unique alternative to blood cholesterol is actually superior in terms of its association with coronary disease. This is because studies done clinically have shown that it is more closely related to the angiographically-measured degree of coronary obstruction than serum cholesterol. It is collected using a pad placed on the palm of the hand, pulled back and inserted in a mailing container. Thus, it is even easier to do PREVU tests than oral fluid tests!
Having interviewed the clinical cardiologist who pioneered this test for use in healthcare and reviewed the world literature on it, we recommend it unconditionally as a rapid screening test (ideally used in tandem with oral fluid).
There was a superb review of PREVU in the latest issue of Hannover Re’s periodical, written by UK actuary Nigel Bradshaw. If you have access to this always-excellent publication, be sure to read it.
To the extent that any of these assets can be built into one’s underwriting paradigm for screening, turnaround time is enhanced with no attrition in terms of protective value.
Requirements whose time has passed, or whose use should be reconfigured to expedite underwriting
Before we consider the list of candidates here, we need to make a key observation about protective value (cost vs. benefit).
Many protective value studies have been published over the last several decades, in On The Risk and elsewhere. Far more have been done by companies internally, deemed proprietary and not shared. As regards this larger group, one does not necessarily need to know the formal results of such studies as they are reflected indirectly, but highly credibly, in the actions these companies take in the wake of their findings. In other words, if you see a respected company introduce a test like NT-proBNP in screening, you know they did their homework and the test has been shown to confer significant value (as NT- proBNP is certain to do).
Protective value studies may also have a “dark side.” They may be configured in such a way as to be little more than “self-fulfilling prophecies.” By this we mean that if someone has an ulterior motive for showing that a given requirement has value, they can readily mold a study toward their ends.
Such a study could appear highly credible solely based on the status of the authors. Thus, it is imperative that we never fail to consider the source, asking ourselves cui bono (who stands to gain). This is the same question criminal investigators ask when trying to decide who may have committed a murder. If we don’t ask it, we won’t be positioned to evaluate the findings carefully enough to unmask missing (or distorted) information which changes the true impact of the stated findings.
There are many medical tests for which one could fashion “protective value” assessments. In some cases, they would be valid, reflecting all considerations that must be brought to bear before making a decision to use the test. In others, they could as easily miss (or look away from) aspects that would argue persuasively against using the test.
One example of this is screening with tumor markers (with the exception of PSA, for reasons we don’t have time to consider here).
We are steadfastly opposed to screening with ALL other known tumor markers because we appreciate the potentially-dire consequences. These ominous consequences are wholly unrelated to their putative “protective value” or “cost vs. benefit” when the mathematical arguments are seen in a vacuum.
These matters considered, we can now look at those requirements that need to be rethought in the age of teleunderwriting.
Chest X-Rays
Which are grossly inappropriate underwriting tests simply on the basis of exposure to ionizing radiation alone…and there are many other relevant considerations as well. Bottom line: we are a financial services industry. By what right do we do something this egregious when screening with chest x-rays is said to no longer be done routinely in patients admitted to a hospital! For more on this and the next test as well, please read ENOUGH IS ENOUGH, an essay recently published in The National Underwriter and posted at our web site. The arguments made in that essay are beyond dispute – or, if someone believes otherwise, we would be only too happy to debate the issue in any appropriate forum!
Treadmill Stress Tests
Which have so many direct and indirect disadvantages that we don’t literally have the room to expand upon them adequately…so we will sum Teleunderwriting Essay #12 January, 2008 5 it up this way: running an insurance applicant on a treadmill is extraordinarily expensive, incredibly slow, wholly subjective in 99% of analyses of test findings, unfair to clients and sales persons alike and devoid of any protective value advantages when compared to faster, cheaper blood test alternatives that can be done (in the US) for 1/15th the cost!
Resting ECGs
Which suffer from some of the same inherent drawbacks as treadmill tests. That said, we believe there is a role for ECGs at higher face amounts at ages 50 and over. Under age 50, they are, relatively-speaking, worthless when compared to faster and more productive alternatives.
Personal History Interviews (PHIs) and Conventional Inspection Reports
Which are effectively eclipsed by teleinterviews. The exception here…and it is a very important exception…is financial inspection reports done on larger sums insured where financial underwriting is often as important (if not more so) than medical underwriting. These reports, done properly, are priceless and cannot be replaced by teleinterviews.
Medical Exams by Physicians
At least in countries where they are significantly more costly than paramedicals. Why? Because everything we have seen to date shows that they do not confer sufficient marginal value to justify the added cost. This situation, of course, is much different in places where (a) MD exams are less costly and (b) doubly so of course when there is no established paramedical infrastructure.
In addition, there are other prevalent requirements whose use may need to be changed relative to the present. Accomplishing this at the same time teleunderwriting is introduced is, if nothing else, practical. You are going to present your new teleunderwriting process to your sales people in a major way. Why not use that opportunity to also introduce changes in other underwriting requirements?
Blood and Urine Profiles
Have very great protective value at age 40 and over. On the other hand, it has been shown that their value at younger ages is modest at best, justifying raising blood/urine screening levels at these ages. In the 2007 Requirements Survey, the majority of companies were still “flat liners” in this context, requiring these tests at the same face amount threshold for all ages, or at least up to age 65 or thereabouts. No doubt this is fueled in part by the presence of blood-test mediated components in preferred risk criteria at young ages (also an issue worthy of challenge). This aspect notwithstanding, our use would be steeply graded by age, getting far more blood and urine profiles at older ages.
PSA
Remains necessary because of widespread routine screening of men as young as age 40-49. The potential for antiselection here is as high if not higher than with other clinical screening tests. Therefore, we advocate judicious use of PSA screening in any underwriting environment where it is done heavily in a clinical context.
Novel Testing Options
Should be carefully scrutinized and evaluated as alternatives to add substantial protective value when we get rid of obsolete entities like chest x-rays and treadmill tests. Among those being most widely explored now in North America are these:
NT-proBNP - which the world literature up to this point has shown to be the finest blood test ever for where heart/circulatory disease risk is concerned. See our white paper at www.insureintell.com.
Hemoglobin A1-c - which many companies use more or less routinely in diabetics and those with elevated diabetic test components on screening blood profiles. We believe HbA1-c has value beyond these worthy uses, mainly as a screening test at ages 40 and over. We expect to see many proactive companies moving in this direction.
Microalbumin - which is underutilized even now in cases where it is all-but-obligatory (diabetes, longstanding hypertension) and would serve us well as a screening test for circulatory disease mortality and morbidity. As strong a case can be made for MA screening as for HbA1-c.
Hepatitis - which serves us well and should be increased in many countries. In those where HBV is endemic, it goes without saying that hepatitis B serology components pay for themselves many times over. In every underwriting environment it is likely that screening with antibodies to the hepatitis C virus would also be more than merely cost-effective. Most companies test for HCV on a reflexive basis (sometimes using, in our view, poorly-chosen criteria). There is substantial evidence to suggest that screening is well worth considering, especially at ages 50 and over.
Apolipoproteins - which are the state of the art in terms of insurance-feasible lipid screening. The ratio of apolipoproteins B and A-I has outperformed conventional lipid tests in most studies where they have been compared head-to-head. Given their ready availability from insurance labs, we would think companies would be disposed to considering them…perhaps with NT-proBNP and HbA1-c as a CV screening package at ages 50 and over for large amounts of coverage.
Hemoglobin - a test we can do readily and inexpensively. Hb is a marker for both occult Fe anemia – a major source of mortality over age 55 – and for borderline/frank polycythemia (an underappreciated mortality factor). We have heard of only two pilot projects in this regard. One, which was small, was said to not show sufficient value (we did not see sufficient details to concur with that judgment). The other we know nothing further about as it is proprietary. Nevertheless, based on what we know about hemoglobin per se, we see potential here.
Closing Comments
Based on the results of the 2007 Underwriting Requirements Study, what we have heard at study groups and other meetings, what we have been told of prevailing underwriting screening practices in Asia and what we know about the medical aspects of testing from clinical sources, we firmly believe that there is much work to be done by many companies to optimize how they use available assets.
We have undertaken projects with a number of insurers in this regards as well as with their criteria used for various classes of “preferred risk” underwriting…
…and without exception we have recommended dozens and dozens of areas where significant enhancements could be made.
We will reserve comment on preferred risk aspects until our 2008 Preferred Risk Survey – currently being completed by US and Canadian life insurers – is tabulated and available for analysis.
Teleunderwriting affords all who embrace it a window period of unique opportunity to make sound enhancements in all aspects of underwriting practices. Whether this is limited to requirements or should also include rethinking preferred/ coronary risk criteria, introducing a “field manual” for agents (an undertaking, by the way, gaining renewed favor) and/or many other initiatives depends, at the end of the day, of what is timely and appropriate for each carrier.
DISCLAIMER
This essay was written for informational purposes only. Hank George and Hank George, Inc. do not recommend or endorse any specific business practice or procedure discussed herein. All business considerations concerning matters covered herein should undergo proper and sufficient scrutiny by appropriate management personnel of the companies involved prior to implementation on any basis. © 2009-10 Hank George, Inc.
