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Perspective

Accelerated Underwriting – Get on The Right Track

September 20, 2017| Von Keith Brown, MSM, CLU, ChFC, FALU, FLMI, RHU | Life | English

Region: North America

Seeing the many different projects being pursued by direct companies is one of the most interesting aspects of working in reinsurance. Just recently I’ve noticed how many life carriers are going down the Accelerated Underwriting (AU) route.

It’s not surprising: the convenience, transaction efficiency and expense reduction associated with AU makes it very attractive. But like many innovations before it, AU can be risky for companies that don’t do their homework.

If you’re thinking about exploring AU, or find yourself struggling with it, Gen Re has developed an approach that can help you make the right decisions. Here are just a few of the areas we think merit close attention.

First, application and personal interview (PHI) question design is paramount. That’s because the potential for material misrepresentation, fraud and greater than anticipated mortality is higher in the AU market than in the full underwriting market.

Surprisingly few companies start their AU programs by redesigning their applications and PHI scripts. More should, because it helps offset some of the lost protective value of paramedical exams and fluid testing.

Some techniques to promote truthfulness in answers to life insurance applications and PHIs draw from the science of Behavioral Economics (BE). But be warned, a little knowledge can be a dangerous thing so make sure that BE is being correctly applied. Gen Re has unique expertise in this area and multiple companies have benefitted from our input.

Persistency is important. It can be improved through application design and answers to questions such as “Total household income?” and “Total number of your dependents?” Comparing answers to published state poverty guidelines can be a great way of evaluating whether the annual premium as a percentage of income is reasonable.

We also advocate incorporating personal interviews in the AU process as an effective way of minimizing mortality loss, rather than relying on just online or agent provided applications.

There are many elements that can be included in an AU program to determine whether a case needs full underwriting. An education verification check (like what's used in employment checks) may be a helpful AU tool as higher levels of educational attainment are associated with better access to healthcare and healthier behavior.

For determining Standard and Preferred class risks, the following three steps may be helpful: checking social media outlets - Facebook, Instagram, SnapChat - for signs of an applicant's nicotine product use and other health-related information; assessing credit attributes; and running an RxCheck.

That’s just for starters. I’ve included a number of other tips in the July edition of our Insurance Issues. As an industry it’s essential we get it right. So get in touch if you want to find out more.

 

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