One of the main reasons some of my private clients hate offering life insurance to their clients is that they don’t want to put their relationship at risk because of the unpreventable headache that is underwriting. They’ve been burned in the past when a case goes south quickly because of underwriting complications. This can lead to their client losing faith and becoming upset with them, inevitably causing the loss of all lines of business with that client.
But, with a little education—as well as setting the proper expectations up front—this nuisance can be alleviated.
Advisors who offer all lines of business to their clientele are the future of financial services. That future is now, so you better get ahead of the curve and make certain that your clients know you represent all-things financial to them. Otherwise, you’ll risk losing them to the true holistic financial professional who comes along and presents a method that taps into the best of all options.
There are two main issues I’ve discovered concerning underwriting troubles which can easily be handled up front.
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Ordering of Medical Records
The first issue I encounter is the ordering of medical records.
When an application is processed and a paramed exam is complete, the client is asked to provide details to every doctor, facility, specialist, etc. that they’ve seen over the past five years. My team then works to obtain these records from those facilities. Unfortunately, some facilities are easier to work with than others. I’ve seen records take one week, but I’ve also seen them take three or more months to obtain.
This is the point in the process when we’re at the mercy of the facility and their timeliness to turn the request. In the case of my team, we personally follow up religiously with each facility to help expedite the process. A phone call from the client to the doctor’s office can sometimes help as well. We do everything we can to rush these facilities to respond, but unfortunately, there can be factors outside our control.
This is why it’s very important to set the expectation with the client about the process, and to happily keep them updated, so they’re aware of the roadblocks and potential delays.
Most importantly, the client must ensure that they’ve provided all the information, every place they have been, and/or been referred to. Otherwise, the action can be delayed longer. A perfect example: Waiting four weeks to obtain records that then show the client was sent to an additional specialist, from whom records now must be ordered from.
Of course, this only delays the process more. Make certain the client understands the importance of providing all details from the last five years, and that they understand it will take some time to obtain the records. It’s an essential part of relieving a lot of unnecessary stress during the process.
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Insurance Medicine vs. Clinical Medicine
The second issue is that clients must understand that there’s a significant difference between insurance medicine and clinical medicine.
Through the underwriting process, the carrier will evaluate both an individual’s medical and non-medical information, then determine the impact these factors will have on life expectancy. Once this information is processed, they assign a risk classification to that insured. A key issue is that this rating (in some instances) can increase the premium that was originally quoted.
Quite often, this comes as a surprise to the client. The revelation then frustrates them. The insured may feel that he or she is in excellent health and has been told by their attending physician that they’re doing fine. Only some minor issues they’ll need to keep an eye on, but no treatment is required currently. It’s a matter of the distinction regarding a client’s medical health and their life expectancy.
The fact is, neither the physician nor the underwriter is wrong. It’s simply a difference in perspective, which comes down to the fact that the physician assesses the health in the present and the insurance company assesses the probable health in the future.
Understand that the insurance company gets one chance to evaluate the client’s history and to predict their health in the future, while the physician can assess their health today and continuously keep tabs on their condition during the client’s life.
Unlike the physician, the insurance company has a very narrow window to evaluate the medical condition. They must assess the potential risk today with the understanding that as an individual’s health deteriorates over the life of the insurance contract, the insurer cannot change their assessment.
Take for example a recent case I worked on where there were abnormalities in a client’s electrocardiogram (EKG) reading. From an insurance medicine perspective, there’s a certain percentage of individuals who will develop a heart disease down the road who present abnormal EKGs today. The client’s physician didn’t see any issue as the client didn’t complain of chest pain and no further recommendations were made.
Of course, the physician knows and has the EKG results documented so that during the next visit they’ll take another look. They can keep tabs on any abnormalities, and if necessary, can take a course of action if something develops.
The insurance company, on the other hand, doesn’t have the opportunity to monitor and observe the insured on a regular basis so they rate this case even though there was no immediate risk or guarantee it would develop into heart disease.
They must base their decision entirely off the percentage chance that this abnormality could lead to a bigger issue in the future. In this case, even a letter from the physician stating there was no issue was not sufficient. By negotiation, we were able to obtain a rating that was better than what they should have received and closed the deal, but it was very frustrating for both the agent and the client; since proper expectations weren’t set up front.
Make sure to offer your clients the necessary life insurance they need within their complete and balanced financial plan. Never worry about losing a relationship because of the underwriting process. It doesn’t have to be a headache. All it takes is a little education and setting the proper expectations up front.
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