Creative Underwriting Solutions

How do underwriters evaluate risk? They assess mortality risk by utilizing several sources: life insurance exam requirements, attending physician statements, Medical Information Bureau reports, pharmacological records, Department of Motor Vehicle reports, personal history interviews, and face-to-face inspections (for jumbo cases).
I like to compare underwriting life insurance risks to evaluating an applicant as a credit risk for either a home loan or mortgage. The latter analyzes income, savings, current debt and debt service (debt history and repayment), and credit reports. The underwriting decision is predicated on the amount of mortgage loan requested relative to the borrower’s ability to repay the loan.

Both types of underwriters essentially include the positives in the “plus column” and subtract the negatives from the “minus column” to determine the final underwriting decision. We all know, regardless of life or mortgage underwriting, the risk assessment can range between an approval for “best” rates to a declination.
For the risk evaluation process, underwriters generally make their decision based upon facts. Seldom are underwriters concerned with or plugged into what is needed to make the sale or underwrite the case with a specific underwriting offer in mind.

So how can the BGA influence the final underwriting decision? How can the BGA take a case from a declination to an offer that results in a life insurance sale? Can a decision be influenced so that it results in an offer that matches the pricing or budget objectives previously established before the underwriting process even began? In short, can a BGA “make lemonade out of lemons”?

Let me share a few examples of how a knowledgeable BGA can influence the outcome of a case using a creative underwriting solution.

Case One: Male, age 49, diagnosed with a rare disease called Zollinger-Ellison Syndrome (ZE).
Zollinger-Ellison Syndrome is a disease in which the body secretes an over-abundance of gastrin (a major physiological regulator of gastric acid secretion). ZE is caused by tumors, usually found in the head of the pancreas and upper small intestine. These gastrinomas occur as single tumors or as multiple tumors. About one-third to one-half of gastrinomas are cancerous (malignant). They spread to the liver and lymph nodes, resulting in significantly reduced life expectancy. ZE had up to this point resulted in declinations!
The proposed insured was treated at the National Institute of Health (NIH) by a physician who had medically managed more than 200 ZE patients internationally. The agent indicated that his client would be willing to assist in any way necessary with the underwriting process for $5 million of universal life.
The insured introduced us to his physician at NIH, who became our advocate and shared his recent study, which demonstrated that some forms of ZE were better than others and resulted in better life expectancy. Prior to the new study, reports indicated that once diagnosed with ZE most patients died in less than 10 years. The new study, which was unpublished, projected life expectancies greater than 15 years.
The study and specific medical history of the insured was submitted to several large insurers. One carrier’s medical director had a background in research, embraced this study as it related to the insured, and made a Table F offer. The result was a final sale for $5 million of universal life.

Case Two: Female, age 70-plus, with a history of bipolar depression, previous suicide attempts, irregular heartbeat, diabetes, and recently diagnosed Parkinson’s disease, who has a live-in health provider.
Many times we see life risks which appear uninsurable, but in reality just do not present well to the underwriter. This is when videotaping can be useful.
The live-in attendant was a licensed health care professional (non-family member) who was paid weekly by the children of the insured (a wealthy family wanting to take care of their mother).
The history and facts of the case indicated a decline. Subsequently, we asked the agent to interview the insured and the live-in caregiver. The video tape was presented along with the attending physician statement to several insurers. Sometimes one picture is worth a thousand words—the result, a placeable offer which resulted in a $1.8 million universal life sale.
Using a video tape can be helpful when the primary underwriting hurdle is a questionable medical history of memory deficiency or memory loss.
Case Three: Male, age 65-plus, diagnosed with chronic lymphocytic leukemia (CLL) for 20 years.
Most insureds with a medical diagnosis of CLL are never standard. Even the best cases of CLL with a remote diagnosis and best staging at diagnosis (stage zero) are normally rated up between four and eight tables.

This client was diagnosed with CLL 20 years prior and was a stage zero at diagnosis. His blood studies (CBCs), although somewhat abnormal, demonstrated a stable pattern of minimally elevated platelet and white blood cell counts. We obtained a Table B offer from a reputable insurer. The best offer ever seen by the insured, however, was still unacceptable. The client felt he deserved a standard offer. Subsequently, we flew the insured to the underwriter who made the Table B offer. The result of that meeting was a revised offer of standard for UL only and Table B if the insured still wanted to buy term. Result: The final sale was $5 million of universal life on a male age 65-plus.
The above cases are but a few success stories using creative underwriting techniques to achieve the desired result. There have been several cases with different methodology used to help underwriters focus their efforts. Many times an experienced BGA can find a creative underwriting solution to cases that may appear unsalvageable. We just have to think outside the box to keep making lemonade out of lemons.

by Glenn Waldman for the April 2012 issue of Broker World Magazine.  Author’s Bio Glenn  Waldman, CLU CLU, has been involved in the life insurance industry since 1971. He is a graduate of Long Island University with a bachelor’s degree in business administration. Waldman’s prior experience as a successful life insurance agent and his prior affiliation as vice president of sales and underwriting with Diversified Brokerage Agency laid the foundation that has enabled him to fulfill the needs of “upscale producers.”

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