The Ultimate Guide to Life Insurance Underwriting

Good life insurance underwriting is critical.

Clients, producers and carriers all have a stake in the process. 

When producers set realistic expectations, clients know what to anticipate and the entire life insurance underwriting process goes more smoothly and takes less time.

As an insurance producer, a smooth process builds your credibility with clients and strengthens your reputation among the people you serve as well as the carriers and general agent you work with. And you get paid faster.

Before we look at the specific steps of the life insurance underwriting process, let’s talk about a few tips for ensuring it all goes off without a hitch.

1. Get familiar with your client

Getting familiar with the client is the simple definition of "field underwriting." 

Underwriting starts with the insurance producer when you’re starting the conversation with the client, and especially when completing an application.

It's the insurance producer's job to know why the client is interested in buying the insurance (the purpose of the insurance) and whether they can qualify for it medically and justify it financially.

When field underwriting, you have to be well versed in asking a series of medical questions – starting with what is on the application and probing for details for any "yes" answers.

If the client has any medical problems – including serious medical issues such as heart disease, diabetes, or cancer – you’ll need to get the details of their condition.

Proper field underwriting saves valuable time and serves the client's best interests. 

It effectively manages their expectations, and not only whether they are likely to qualify for the insurance, but at a realistic rate class and corresponding premium. 

No consumer wants to feel as if they were misled in their pursuit of insurance.

2. Get the cover letter right

A well-written cover letter, stating the need or purpose for the policy, provides an underwriter with a clearer picture of the applicant and the case, and improves your chances of a positive outcome.

The letter (or email) should include the information you gathered in the previous step: how you know the person, for how long, how you met, etc., as well as a synopsis of their health history, lifestyle, and financial circumstances.

A larger or more complicated case requires a detailed cover letter with more information, such as how the face amount and the premium were determined, who the owner and beneficiary is and/or any other special circumstances. 

Remember, you are "selling" the case to the underwriter as well as the client!

3. Cultivate a relationship with the General Agency’s case manager

It’s to your benefit to build a positive, working relationship with the General Agency’s case manager.

They’re knowledgeable about the underwriting process and you can gather a lot of valuable information that can help you in future cases, as well.

Steps of the life insurance underwriting process

Now that you have a few tips in your arsenal to both speed up and smooth out the life insurance underwriting process, it’s time to take a look at the actual steps you and your client will go through together to secure their coverage.

1. Application Review

This is the beginning of the underwriting journey.

At this point, the general agency’s case manager will be looking to be sure your client’s application has been completed satisfactorily and nothing has been skipped over or left out.

Missing or incomplete information on an application can cause delays in processing. Your goal is an application that is In Good Order (IGO).

2. Paramedical Exam

Your client may need a paramed exam, depending on their age and the face amount they are applying for. The examiner comes to the client – either at their home or office to evaluate them based on:

• Height, weight, and blood pressure.
• Blood and urine specimens.
• A comprehensive set of questions about their health history.

The results of the exam are sent to the underwriter for evaluation.

3. Attending Physician Statements (APSs)

An Attending Physician Statement (APS) is a medical record that includes details about how healthy (or unhealthy) your client’s doctor thinks they are.

It provides a more in-depth look at any conditions the client has been diagnosed with, including duration of illness, prognosis, etc.

APSs can be ordered due to the age of the applicant, face amount being applied for, or due to medical history that shows up on the paramed exam.

For example, a person may either admit to or have experienced high blood pressure. An APS can assure the underwriter that it is being treated with medication and is under control.

4. Medical Information Bureau Check

Carriers use the Medical Information Bureau (MIB) so that they are aware of previous applications for life insurance and what the result may have been. It reduces the chances of fraud and clients jumping from one insurance carrier to another without disclosing past results.

5. Prescription Database Check (Rx check)

An underwriter will do a prescription database check to make sure the information your client provided about medications on their life insurance application matches up to what they’re actually prescribed.

6. Motor Vehicle Report (MRV)

A motor vehicle report lets the underwriter gain an understanding of how risky your client is.

The carrier may be hesitant to insure a person with multiple citations, DUI convictions, or accidents or will require a higher premium due to the increased risk.

7. Actuarial Tables

In the world of life insurance underwriting, there are multiple tools used to determine risk, as you’ve already seen.

Here are the three used for life insurance purposes:

• Underwriting manuals. These are used to add debits (or credits) to specific medical conditions in order for the carrier underwriter to come up with a rate class.

• Mortality tables. This shows mortality probability based on gender and age. It is used as an indicator of when your client will most likely die, statistically speaking.

• Build tables. A build table uses your client’s body-mass index (BMI) to determine how risky your client will be to insure. A poor “build” will require a higher premium.

8. Additional Crediting Programs

Once an underwriter has gone through the first seven steps, they’ll go back and look for areas where your client may deserve additional “credits” to make the premium more affordable, such as lifestyle credits or "table shaving" programs, where carriers try to improve a rate class to something better.

For example, your client may be overweight, putting them in a “Standard” (or worse) category. 

But a crediting program can come to their rescue if they’re actively making strides toward losing weight and becoming healthier.

9. Final Rating

The life insurance underwriting process can take anywhere from three to eight weeks to be completed. (For certain ages and face amounts, there are "accelerated underwriting" programs where some approvals can occur within hours or days if the applicant is very healthy and passes initial underwriting standards.)

After all the steps are completed, a case may be approved and you're ready to give your client the underwriter’s rating decision. Once the client accepts the offer and signs the policy delivery requirements, the policy can be placed in force.

Get familiar with life insurance underwriting basics

Your clients trust you.

They count on you for the most up-to-date information about applying for life insurance and being underwritten for coverage in the most expeditious way.

Good field underwriting is critical to getting your client approved for life insurance. Be open and honest about each step in the process, and help your clients understand what to expect.

Get to know them, write a detailed cover letter and give the carrier underwriter more reasons to approve your client's application.

Follow these tips and the whole process will run more smoothly – from start to case paid!