What is your underwriter thinking?

(September 2005) Ever wonder what your underwriter might be thinking? Although many companies are working to adopt, cultivate and encourage a more cooperative approach between advisors and underwriters in an effort to put business on the books, the two groups have very different objectives to consider when processing a client’s application. Compared to the old days when advisors and underwriters were so separate they might as well have occupied different planets, Bill Marschall, AVP and chief underwriter at Transamerica Life Canada, says underwriters these days are encouraged to be more sales focused. “I think sometimes advisors tend to think of underwriters as, maybe not all that sales-oriented or interested in putting their case on the books,” he says. “We have to maintain good mortality, but we still want to be able to put as much business on the books as we can.”

To help with that process, Advisor.ca talked to several Canadian underwriters to find out what advisors can do to help that part of the sale go smoothly for everyone involved.

Across the board, their number one recommendation is to start by reviewing the application, providing as much information as possible, and considering why the information might be important. Simply completing all the fields is not sufficient if the answers create more questions.

Although electronic insurance applications are built with rules that force certain fields to be filled out before the application can be submitted, many advisors still prefer paper-based forms. And although few applications actually get through with blank questions, the biggest thing is not providing enough information, says Mervyn Gillson, chief underwriter at Unity Life of Canada. “A broker might just say someone’s on medication for blood pressure, but that doesn’t tell us how long they’ve had that blood pressure or how high it was before they had the medication,” he says. “For the underwriter it means you have a red flag going up, but you don’t know how to assess the risk. It just adds time delays and added costs to putting the business on the books.”

As well, it helps to appreciate that underwriters are accountable, not only to reinsurance companies, but also to their own company to help contain the costs of an investigation. “You can never have too much information. It’s better to have it up front than to have to dig for it,” adds Marschall.

For example, Gillson says if a client is not entirely sure what they’ve been diagnosed with, the names and dosage of the medications they’re on can give the underwriter a good idea of the patient’s history. That information can help underwriters contain their costs, and if advisors are forthcoming on a regular basis, an element of trust develops that can help in the relationship.

“It makes everybody’s job easier if an advisor and an underwriter have a good ability to communicate. If an underwriter trusts what an advisor is telling him, and has a track record of never misleading or anything like that, it’s very helpful, and I think that could have some benefit,” says Marschall. “Likewise, if an underwriter really does go to bat for an advisor and takes the case as far as he can, hopefully the advisor understands that when a case is rated, it’s rated and he might be less inclined to take it and shop it to another company.”

To help advisors at the information gathering stage, some insurance companies are introducing a telephone interviewing process for collecting medical histories to save the time and frustration of a back and forth exchange when there isn’t enough information on an application.

At the same time, with universal life underwriting in particular, they say a cover letter is useful in explaining coverage amounts that could otherwise appear to be random if the underwriter is not privy to the concepts used in the sales process. For example, in term sales, premiums are determined based on the total coverage a client needs. Coverage for UL on the other hand, is determined after the fact, based on the amount clients are able to invest.

“As the cases get larger, as they often do with universal life, we really appreciate getting a cover letter from the advisor, or a note of some kind, letting us know the basis of the sale. If the advisor has used a certain concept in order to come up with the amount that’s being applied for, the information behind that amount often makes it really easy for the underwriter to understand how the sale was made and why the person has applied for that much,” says Pat Faichnie, vice president of underwriting and issue at Sun Life Financial. “It makes things go a lot faster. It just adds another dimension.”

Finally, she says advisors can make the process easier by knowing their clients and setting reasonable expectations about the sale. “If the advisor finds out that the individual just had a heart attack last month, let’s not set expectations that life insurance will be available right away. The person might need to wait for six months,” she says. “I would say set expectations, and the more information we have the better. It needs to make sense to us. There has to be an insurable interest from the underwriter’s point of view.”

Filed by Kate McCaffery, Advisor.ca

(09/07/05)