UNDERWRITING REQUIREMENTS
by Chris Cook, FALU, Travelers Life & Annuity/Citigroup,
(This June 2003 article
is reprinted with permission of ON THE RISK,
Journal of the
If you don’t know what
you’re going to do with the results, then why are you ordering it. If you are trying to diagnose something, please stop.
This author feels
extremely fortunate to be and have been a member of many groups and committees
that benefit both our North American and global underwriting communities. These
affiliations permit participation in not just the education of our profession,
but also in-depth, non-antitrust discussions that provoke thoughtful and
insightful debate and discussion, most recently while at the Association of
Home Office Underwriters meeting.
Of late, one topic that
is frequently raised, but is disturbing, provided the impetus for this article
- that being the ordering of “for
cause” underwriting requirements - with the term “for cause” being used extremely
loosely. The following examples listed below are meant for illustrative
purposes to reflect what is being seen across our industry:
Scenario 1:
Female age 45 applying
for $10 million, 2nd to die product,
spouse is best class. All her requirements are normal, MIB codes are negative,
but APS does suggest a remote question of MVP without symptoms or even SBE
prophylaxis. 2000 stress test to 15 + mets was
negative for any symptoms or other adverse response. No murmur has been auscultated on any APS, CPE or current age and amount MDX.
The underwriter declined the case subject to completion of a current
echocardiogram.
Scenario 2:
Female age 37 applying
for $15 million, 2nd to die product,
spouse is best class. All her requirements are normal and MIB codes are
negative. Female just had her 3rd natural childbirth with no prior
histories of complications nor current complications
and APS provided no other contributory history other than planned routine four-week
post-partum follow-up. The underwriter postponed the case subject to results of
the post-partum check to be done in a month.
Scenario 3:
Male age
54 applying for $3 million of single-life, VUL product. All his requirements are
essentially normal, MIB codes are negative, IR and MVR are negative, but GGT
elevated 10 points and CDT is positive. APS provided no criticism at all and
serial SMAC’s had been normal five plus years. The
underwriter declined.
Scenario 4:
Male age
45 applying for $5 million of single-life, UL product. ALT and GGT elevations of
<1.5 times and client on a statin Rx. Underwriter
requested a CDT which was negative then declined the case for unevaluated LFT
elevations.
Scenario 5:
Female age 48 applying for
$500,000 best class term (premium likely $50.00 per year) with three RBC’s in her urine and labslip
confirmed client mensing at the time. Underwriter
requested two additional random re-voids which came back negative for RBC’s then issued the case standard versus a select class
due to the original urine results.
These scenarios are
only the tip of the iceberg when it comes to needless requirement ordering and
chasing good business out the door of a company and with it good producers as
well. The Willy Loman line from Arthur Miller’s Death
of a Salesman comes to mind: “The woods (trees) are burning; the woods (trees)
are burning all around me!!!!” These referenced scenarios present to the
producer a truly illogical approach we have taken to our profession. While
certainly not meaning to make a sweeping generalization, as stated, this type
of scenario has been an extremely frequent and frustrating topic of discussion.
It is imperative that
we as an industry do not get in the medical diagnosis business - or, worse yet,
feel that we have all of the answers and refuse to listen to alternative
presentations on a case and dig our heels in “just because we want a
requirement” with no logical or rational case presentation.
We are all aware of the
protective value assessments each of our companies completes when looking at
requirements as they relate to product pricing, and this article is in no way
inferring nor meant to infer that age and amount requirements do not provide a
company with protective value. We as a profession, however, need to remind
ourselves that underwriting is an art and that the type of pictures painted in
the above underwriting scenarios certainly wouldn’t be worthy of anybody’s
wall.
Is it a lack of
underwriter education? Maybe, but some of these cases were handled by
10-year-plus veterans, although we all know that the amount of time spent doing
something doesn’t make someone good at it. Is it the fact that we are doing
more with less, as it were? Maybe. Reduction upon
reduction of staffing while casework increases can certainly be a factor which
affects incorrect assessments such as the ones referenced above. The
underwriter having so many files may just try to make some decision to get the
case off of his/her desk. Are there hidden agendas? Maybe.
Direct writers may wish to stop doing business with a producing office, or
reinsurance companies may wish to seek termination of a treaty. Instead of providing an appropriate
professional discussion forum, the approach of “underwrite to death” can be
used to terminate relationships by any party.
All purely conjecture here, but well within the realm of possibility.
It is imperative that
we operate and assess risk appropriately within the guidance of our respective
companies’ guidelines. Also, it is imperative that underwriters with more
experience (who are truly knowledgeable) mentor up-and-coming underwriters and
encourage study of the ALU curriculum. We must continually remind ourselves
that we are not in the business of diagnosing conditions, but rather underwriting
the risk.
That
many companies have taken the approach of viewing the underwriting/new business
departments as less than integral to their operation has been discussed in
previous articles presented in OTR. The types of scenarios presented and
discussed here provide ample fodder for this thought process to continue. We
must remember the buyer remorse aspect of the life insurance sale and that the
longer it takes us to process a case, the higher the percentage of not-takens.