Understanding Underwriting

RIGHT TIME / WRONG TIME

Sometimes later is too late and you may not get a second chance!

There is never a right timeHowever, I can tell you the wrong time and the wrong time won’t be the right time, and after many years of helping people with life, disability, critical illness and long-term care insurance planning.  Unfortunately, I have seen people wait too long.  You don’t know how important your insurability is until it changes.  HEALTH IS WEALTH WHEN IT COMES TO UNDERWRITING.  Proper insurance planning has to ALWAYS occur in advance of the need.  A change in your insurability is not a planned event and the need for good insurability won’t tell you a day in advance.  Leverage your good health now.

The Right Time is Right Now!

Sometimes in life, you don’t get a second chance especially when it comes to underwriting insurance.  How would you feel if you wanted something, needed it badly, and couldn’t buy it at any price? 

Managing Your Expectations 

MANAGING YOUR EXPECTATIONS is KEY in the world of processing any application that requires medical underwriting. This is where many years of experience counts.

What Is Underwriting?

Underwriting is an evaluation process to establish your eligibility based on the concept of risk-sharing.  Underwriters seek to determine the level of risk represented by each applicant and then assign that person to a group with similar risk characteristics.  In this way, the risk potential can be spread among all insureds within a given risk group, assuring that each person assumes their fair share of the insurance cost and pays the appropriate premium.  Underwriters collect and review multiple risk factors such as age, occupation, driving records, medical and family history, prescription drugs, lifestyle, and smoking habits, etc., with verification from many different sources including your medical records or a national prescription drug database.  Financials, insurable interests, a telephone interview or medical tests if required are also considered in the underwriting process.  The level of risk and premium for the insurance applied for can only be determined after a review of this information.

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Underwriting is like a traffic light.

Red light (real underwriting issues/problems)

Yellow Light (potential underwriting problems proceed carefully)

Green Light (no underwriting issues)

Basic Rules for Applying

RULE #1 Always allow for more time rather than less time to process an application.  This way we can anticipate delays.

RULE #2 – Never apply for life, disability, long-term care or critical illness insurance without knowing in advance what underwriting issues you might face, if any.

RULE #3 – Surprises are fun at birthday parties.  Not in underwriting!

RULE #4 – Why you don’t want to “just apply” for insurance?  You will create a MIB (Medical Information Bureau) record that will follow you for a period of time and address issues from a previous application (life, disability, long-term care, etc.,), which may be detrimental to future insurance applications.  Underwriting decisions are not coded, medical conditions will be coded about you.  Note, if you were previously declined or rated, you are asked these questions on a future application, which you will have to disclose.

The MIB is a nonprofit membership organization of insurance companies which operates an information exchange on behalf of its members. Upon request by another member insurance company to which you have previously applied for life or health insurance coverage or submitted a claim.  The MlB, Inc. will provide the information it may have in its file.

Did you know you can get your MIB report or question the accuracy of the information they have on you?  The MIB, Inc. will arrange disclosure of any information it may have in your file upon receipt of a request from you.  You can reach them at (866) 692-6901 or visit their website www.mib.com for more information.

Medical Records

I don’t know what is in your medical records, and most likely you don’t know either.  Have you ever reviewed your medical records?  Did you know you can?  Why is this so important?

An underwriter in the processing of an application for insurance may or will be reviewing your medical records to confirm overall health, a medical visit, specific test results or clarify a medical condition.  What happens if they see bad or erroneous information in your medical records?  It happens and I have seen it happen many times throughout my insurance career.

Tip #1: Your physician is not only qualified to practice medicine but also a professional note taker and they note everything!  Your records may have bad or incorrect information, problems that will certainly raise the eyebrow of an underwriter and create medical underwriting issues. This is why reviewing your medical records and clarifying any possible issues in advance of submitting an application is always in your best interest.

Tip #2:  There may also be situations where a letter from your doctor is needed and helpful to favorably interpret a diagnosis, medical issue, condition or overall health.  This can go a long way in convincing an underwriter there is not a medical problem, or it has been resolved, which can help get you approved, receive a more favorable offer for coverage or better premium rate.           

Tip #3: Completing a medical test to confirm and show a condition or issue is stable or resolved can also be beneficial in underwriting an application for insurance.

Underwriting is like putting a puzzle together.  

Everyone’s pieces to their own personal underwriting puzzle are unique and different.  Some puzzles are easy to put together and others are more complicated and difficult.

What do I mean by this?  Working with many professionals, business owners and employees over the years, I’ve found people tend to assume that they are the best risk, and find it difficult to understand, comprehend or accept the company offering and issuing a policy other than at the lowest premium rate, restrict or reduce benefits, charge an additional extra premium or unfortunately when the risk is too great, even decline the applicant.  Why would the company do this?  My job is to help you understand your risk factors, in advance, so the offer for coverage does not come as a surprise.

I start by pre-qualifying you with underwriting questions and information you provide me.   Many times, I will check with an underwriter to advise me of potential underwriting issues. This is done before you apply for the desired insurance and why managing your expectations is most important and crucial in the underwriting process.

My Cover Letter

I complete my applications very thoroughly, and I will provide a cover letter many times to explain a particular situation or issue to the underwriter.  It is all about the details.

A cover letter is a very important tool in the processing of an application.  It helps the underwriter answer questions and read between the lines on an application.  It may include the purpose of the insurance, a brief summary of my clients financial and medical history.  How long I have known the applicant and have I represented them previously with my professional services and for what type of insurance they purchased from me?  More importantly, it clarifies issues and solves questions that the underwriter may have, and I may at times even ask for special considerations I feel are appropriate for my applicant’s personal situation.

The Application 

I want you to apply the correct way.  It’s always in your best interest to provide full disclosure on your application.   Be smart and truthful.  Do it right and apply right!  

The application is the legal basis of the insurance contract applied for and has been designed to elicit specific information needed to issue a policy.  Each question on the application must be answered correctly.

An admitted existing medical condition, avocation, foreign travel destination, etc., indicated on the application, and not specifically excluded by the company will be covered from the date of issue of the policy.  Failure to inform the company could result in rescission of the contract or denial of a claim. 

Honesty is the best policy in underwriting, honestly!

INSURANCE IS JUST A PROMISE TO PAY.  You need to know and understand the importance of answering the questions on your application truthfully and always provide full disclosure.

LIES, DECEPTION AND DISHONESTY DOESN’T WORK.  You never ever want to apply for any type of insurance this way.  Why?  The company upon discovery of omissions on an application or fraud will be singing a different tune at claim time, and you will not like the song they are singing when your claim gets denied. 

YES, HONESTY IN UNDERWRITING IS THE BEST POLICY, HONESTLY!

Remember surprises are fun at birthday parties not at claim time.  Be smart, don’t ever give a company an out to pay a legitimate claim because you failed to disclose an existing medical condition, smoking habit, marijuana or other recreational activity, etc.

The Contestability Period.  I strongly urge you to review the completed application closely for accuracy.  During the 2-year contestability period described in the policy, a claim may be denied if the application contains false statements, misrepresentations or fails to disclose material facts.  In such a case, the policy could be void and coverage could be lost when needed the most.  There is one exception found in many policies beyond the 2-year contestability period and that is if the company can prove with your intention fraud.  Your claim will be denied.  This is not always easy to prove on the part of the insurance company, but they will try if they can.  The key point is to simply be honest when answering questions on an application and the contestability period or fraud clause will never be an issue for you.

What happens when an offer for your insurance comes back differently than what we anticipated?

I would investigate why and what caused the company to make an offer we didn’t anticipate.  Was it something in your medical records?  Was it something in your lab tests?  Was it something picked up in a telephone interview?  Was it something coded on the MIB?

I might suggest to you:

(1) Reduce the face amount if it is life insurance or possibly accept the policy for a shorter period of time to make the premium more affordable.

(2) Reduce benefits if it is a disability or long-term care insurance offer.

(3) Put the policy in-force and pay monthly as the need for the insurance has not changed, only the offer is different than what we anticipated.  Remember,  I do not work for any one particular company.  We would take what we know and consider an alternative company to try and improve upon the current insurance policy or premium.

Underwriting continues to evolve and change!

  1. It’s quite possible that a medical condition or diagnosis can stabilize and improve with the passage of time.  Thus creating a better chance to receive a more favorable offer.  Favorable changes or improvements in testing and lab results can also lead to a better offer or premium rate.
  1. Insurance companies continue to review and evaluate underwriting results and profitability with their actuaries and reinsurers along with new medical treatments, medical testing, evolving data, and technology.  This can help to improve and create more competitive and better underwriting offers.
  1. Each insurance company has its own unique underwriting approach.  This means they can and do view the same set of medical information differently, even quite differently at times.  For example, one company may see a set of facts indicating a particular impairment and view them as an underwriting issue, while the next company, reviewing the same facts, has no problem at all with them.
  1. Insurance companies assign a greater or lesser risk rating for a particular impairment compared to the competition, and they have proprietary risk crediting programs and table reduction programs that can come into play and benefit the applicant.  These programs become more liberal, more highly refined, and more flexible each year.
  1. The niches an insurance company may favor include coronary artery disease, prostate and breast cancers, multiple impairment cases, sleep apnea using CPAP, gastric bypass surgery, types of tobacco and marijuana usage, alcohol abuse history, depression, and anxiety, etc.

The insurance company goes on the hook for a lot of money.

Remember an insurance company goes on the hook for a lot of money compared to your premium, and they must do proper due diligence on their part in the evaluation of your application as a risk to the insurance company.

The idea of good underwriting is (1) managing your expectations and, (2) being able to move your application through the underwriting process as quickly as possible with the fewest delays.

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Let me help you put the pieces of your underwriting puzzle together.

My ultimate goal together with you is matching an anticipated offer with the final underwriting offer.  This adds up to an underwriting success when an offer is accepted by you and a policy is put-inforce.  It is about you winning and me helping you to win!

Please call me at (310) 275-4069 or email marcmaretsky@att.net and let’s discuss your personal situation.