Author: Lee Morris
When searching for the best policies for clients, life insurance agents, brokers, financial planners and underwriters often may wonder, "Which carrier excels in ________?" (insert any medical condition, avocation, aviation, etc.)
Most carriers use one of two to three reinsurance manuals, with a few exceptions allowing for slight deviations. These deviations typically occur when a carrier has experienced a decline in risk due to mortality experience or advancements in medical knowledge. So, if all insurance carriers are essentially using the same manuals, why do they market specific sweet spots or niches"?
A "carrier sweet spot" in life insurance underwriting refers to the specific risk profile where a carrier has developed a competitive advantage. While all carriers may use the same foundational manuals, their internal experience, historical data and risk appetite can differ significantly. A carrier might have more favorable mortality data for a particular condition, or their internal processes might be more efficient for a certain type of policy. This expertise and data allow them to offer more favorable rates or terms for that specific niche, which they then market as a sweet spot to gain a competitive edge. This is why, even with shared manuals, individual carriers can still specialize and distinguish themselves in the market.
How can a carrier claim to have a sweet spot?
One explanation is that carriers aim to increase their exposure to specific demographics or promote new products. Regardless of the reasoning, their desired outcome is to be associated with certain underwriting issues. However, upon closer examination, it becomes clear that a single medical condition cannot be universally applied across the board. In my 33 years of underwriting, I've never encountered two identical cases. Furthermore, physicians often have different interpretations and analysis of diagnoses and treatments. Even in the case of twins with similar DNA, their medical diagnosis and treatments may differ. Thus, the question remains: How can a carrier claim to have a sweet spot?
Example: A carrier claims that "melanoma can be considered at a preferred rate."
It's crucial to analyze the terminology used in such statements. The phrases "can be" and "considered" are highly subjective and don't guarantee or provide a percentage of probability for this outcome.
When carriers employ subjective terminology like "could," "consider," "eligible," "traditionally," and "possible," they're suggesting that certain applicants may meet the eligibility guidelines for that rate class. However, there are no confirmations that any case will fit within those guidelines, nor do they provide specific guidelines that applicants must meet.
Now, let's delve into the reinsurance manuals carriers use. Certain sections of these manuals indicate that an improved rate class is available if specific parameters are met. However, statistically speaking, most carriers rely on a select few major reinsurance manuals. If most carriers are using the same manual, how can one carrier assert that a certain condition can be "considered" a particular rate class when every carrier using that same manual can make the same claim? This positioning of their product and underwriting allows them to attract additional attention to their company, presenting a more positive and liberal underwriting perspective.
How deep underwriting experience shapes the assessment process in life insurance
Experience and perspectives of underwriters advising financial professionals can greatly influence the assessment process. Field underwriters face challenges when they lack technical carrier experience, which hinders their ability to fully comprehend medical knowledge and adapt to the unique requirements of each assessment. Despite field underwriters gaining knowledge through exposure to medical cases and underwriting-related education, their understanding may not encompass all the technical aspects of carrier underwriting assessments. However, if a distribution channel has access to underwriters with extensive carrier experience, it can facilitate more accurate conversations regarding carrier recommendations.
Life insurance underwriting is subjective. When faced with a mortality risk, underwriters rely on the guidelines outlined in the carrier's manual. However, the ability to adjust an assessment from one rating to another is influenced by various factors, which may include:
- An underwriter's technical understanding of the risk: Underwriters with extensive training can go beyond the technical aspects of the risk and use the art of underwriting.
- An underwriter's experience and confidence in underwriting: Newer underwriters are typically more cautious until they gain a deeper understanding of the parameters that justify being more aggressive or conservative with a risk.
- An underwriter's personal exposure to a condition or risk: Underwriters with personal experience with a specific risk tend to draw upon their own experiences when evaluating similar conditions, such as a history of race car driving or a close relative with a similar risk. Their perception naturally tends to be more aggressive than what's outlined in the manual.
While underwriters aren't physicians, their extensive experience allows for a deeper understanding of medical diagnoses and treatments. Underwriters may better understand certain conditions than others, providing them with the confidence to take a more aggressive or conservative approach.
As with any profession, the longer an underwriter is in the position, the more comfortable they become in making decisions. An underwriter's experience and knowledge not only encompass the basics of a condition but also how numerous factors can influence it. By fully understanding methods of diagnosis, degrees of progression and available treatments based on an individual's health history, underwriters can effectively apply the same condition to each applicant's unique circumstances.
Personalizing the client application experience
The underlying principle is that individual life insurance underwriting is highly personalized. Attempting to apply a standardized rule to evaluate the eligibility of applicants with specific medical conditions would be inaccurate, as each client possesses unique circumstances. If individuals with the same diagnosis were truly indistinguishable beyond that diagnosis, the medical profession would have fewer physicians and fewer instances of seeking second opinions.
Labeling and marketing a carrier's underwriting style can yield adverse consequences, such as setting unrealistic client expectations or restricting potential alternatives. It's common for applicants to anticipate a specific premium, only to receive a significantly different offer after the carrier conducts a thorough risk assessment. This situation requires financial professionals to revisit the sales process and effectively communicate the outcome to the client, potentially resulting in the risk of losing their business.
To truly value and serve clients, it's imperative to treat them as unique individuals rather than attempting to fit them into a predetermined framework. This personalized approach helps empower financial professionals to address each client's distinct needs, which is the cornerstone of delivering exceptional service.
Bolstering policy placements and helping clients face their future with confidence
The difference between surviving and thriving through underwriting comes down to the broad and deep experience of the brokerage general agency (BGA). Assess your BGA's carrier relationships and underwriting team using the checklist below.
Does your BGA go the extra mile to help secure coverage for even the most complex of cases by:
- Relying on strong carrier relationships to achieve the best possible protection on your client's behalf
- Giving each case the attention and care it deserves
- Leveraging advocacy to enhance negotiation results
- Employing strategies to aid in placement of unforeseen rated cases
- Understanding mortality risk versus clinical assessment and helping you discuss it with your clients
- Conducting educational opportunities for office growth in field underwriting
- Serving as an extension of your office
Your BGA should provide access to specialized knowledge, a leading proprietary underwriting platform, advanced technical experience and have a strong sales perspective embedded in their culture. With extensive carrier leadership experience, the Gallagher Life and Annuity Brokerage Underwriting team stands as a pacesetter in the finer points of risk assessment and has a history of millions of dollars in premium successfully negotiated.
Working with the insights and knowledge that the Gallagher Life and Annuity Brokerage team provides can significantly improve the insurance acquisition process for a client while enhancing an advisor's placement rate. Reach out to discuss your toughest cases today.
