Understanding Life Insurance Underwriting: A Guide for Agents
Guide your clients through the underwriting process with confidence. Learn how insurers evaluate risk, why "healthy" clients might raise concerns, and how to set realistic expectations.
The Underwriting Process: What to Expect
Underwriting is the insurer's method of assessing a client's risk profile to determine insurability and premium rates. The process typically takes 4-8 weeks, though it can vary based on complexity.
Application Review
Client completes detailed application covering personal information, lifestyle, occupation, and medical history.
Medical Exam
Paramedical exam including blood tests, urine samples, blood pressure checks, and measurements.
Medical Records
Underwriters request Attending Physician Statement (APS) to verify health history.
Additional Data
Review of driving record, prescription history, and Medical Information Bureau (MIB) data.
Risk Classification
Client assigned a risk class (Preferred Plus, Preferred, Standard, Substandard) determining premium rate.
How Underwriters Evaluate Health History
Underwriters analyze a client's health history to assess both current health and potential future risks. They rely on actuarial data and medical guidelines to quantify how various factors correlate with life expectancy.
Diagnosed Conditions
Chronic illnesses like diabetes, heart disease, or cancer are red flags. Even well-managed conditions can elevate risk.
Family Medical History
Family history of conditions like heart disease or cancer, especially in first-degree relatives before age 60.
Lifestyle Factors
Smoking, excessive alcohol use, or high-risk hobbies increase mortality risk.
Lab Results
Blood tests revealing issues like high cholesterol, elevated liver enzymes, or abnormal glucose levels.
Mental Health
Conditions like depression or anxiety, especially if they involve hospitalization or significant medication.
Why "Healthy" Clients Might Raise Concerns
Clients who appear healthy—active, fit, and with no obvious symptoms—can still pose risks to underwriters. Understanding these factors helps agents prepare clients for potential underwriting outcomes.
Undiagnosed Conditions
Routine medical exams during underwriting might uncover issues the client was unaware of, such as elevated blood sugar, high cholesterol, or abnormal liver function.
Family History
A client with no personal health issues but a strong family history of early heart disease or cancer may be rated higher risk due to genetic factors.
Borderline Metrics
Metrics like slightly elevated blood pressure or a BMI just above the ideal range can signal future problems, even if the client feels fine.
Prescription History
Medications for seemingly minor issues may indicate underlying conditions or side effects that concern underwriters.
The Impact of "Minor" Conditions on Life Expectancy
Clients often downplay conditions they believe are under control or unlikely to be fatal. However, underwriters take these seriously because they can significantly impact long-term mortality risk.
Cumulative Risk
Minor conditions strain systems over time
Complications
Well-managed conditions can still lead to issues
Medication Effects
Long-term medication use impacts organs
Lifestyle Implications
Conditions affect daily functioning and risks
For instance, a client with controlled mild hypertension might argue it "won't kill them." However, actuarial data shows that even mild hypertension increases mortality risk by 10-20% over time compared to those with normal blood pressure.
Setting Realistic Client Expectations
Preparing clients for the underwriting process helps avoid disappointment and increases the likelihood of securing appropriate coverage.
Encourage Honesty
Stress the importance of full disclosure. Inaccurate or incomplete information can lead to delays, higher premiums, or policy denials.
Explain the Timeline
Set realistic expectations for the 4-8 week process, noting that complex medical histories may take longer.
Clarify Health Perceptions
Help clients understand that "feeling healthy" doesn't guarantee a top risk class. Share examples of how minor conditions or family history can affect ratings.
Discuss Possible Outcomes
Prepare clients for the possibility of a higher premium or a rated policy if health issues are identified. Explain that this reflects long-term risk, not just current health.
Case Study: The Marathon Runner
Understanding real-world examples helps agents better explain underwriting decisions to clients who may be surprised by their risk classification.
The Client Profile
A 40-year-old marathon runner who appears to be in excellent physical condition. He exercises regularly, maintains a healthy weight, and has no obvious health concerns.
The Underwriting Findings
Blood work reveals slightly elevated cholesterol. Family history shows father and grandfather both had heart attacks before age 60.
The Outcome
Despite excellent fitness, the client doesn't qualify for Preferred Plus rates. Underwriters see potential for future cardiac issues, even though the client is currently symptom-free.
Securing the Right Coverage
The underwriting process is a thorough risk assessment that goes beyond surface-level health. By understanding how underwriters evaluate health history and why minor conditions matter, agents can better prepare clients for the process.
Educate Clients Early
Before application, explain the underwriting process and how various health factors might affect their rating. This sets appropriate expectations from the start.
Gather Complete Information
Help clients compile a comprehensive health history, including dates of diagnoses, treatments, and physician contact information to streamline the process.
Explore Multiple Options
If a client receives a substandard rating from one insurer, consider shopping with other carriers who might view certain conditions more favorably.
Focus on Value, Not Just Price
Help clients understand that securing coverage—even at a higher premium—provides valuable protection for their loved ones, regardless of risk classification.