How to head off ratings and declines by doing work ahead of the application process.
No advisor likes hearing their client has been rated or declined for insurance. But field underwriting and trial applications can detect problems, and potentially head them off, before an actual application is submitted. Something as simple as writing a cover letter can increase the likelihood a client will be looked at holistically when an underwriter receives their application. Recently, some MDRT members shared these and other insights for handling issues with underwriting.
1. Ask the right questions
Be specific. Ask, “What kind of medications are you taking, both over the counter and prescribed?” recommended Robert L. Avery, CLU, ChFC. “When you get back to the office, you can Google what the prescriptions are. They could be heart or blood pressure medications. You can get an idea of what kind of health the person has so you don’t get any surprises.”
Sarah J. Kaelberer, CFP, ChFC, has had clients tell her they don’t take any medications. “They might be on medications for cholesterol or depression and they say no because they’re so commonplace. Sometimes it’s framing the questions differently: ‘Do you go to the pharmacy to pick up any medications?’
“I don’t think clients are trying to misrepresent things,” said Kaelberer, an 18-year MDRT member from Wayzata, Minnesota. “They just don’t think of it like we do.”
2. Understand underwriters
“The thing that concerns underwriters is the unknown,” said Avery, a 33-year MDRT member from Denver, Colorado. “The more you can tell the underwriter the better.”
3. Do the process yourself
“A new advisor should be doing field underwriting themselves. They need to understand how it works before giving a quote,” said Kerry Wallingford, RICP, ChFC, an 18-year MDRT member from Seattle, Washington. “The more they understand underwriting, the better the process works for them. You’re never going to understand those questions if you don’t ask them yourself.”
4. Write a cover letter
A cover letter representing all aspects of a client’s lifestyle can help offset some of the concerns that may pop up on a medical questionnaire. Kasey Massatti, MBA, always includes a cover letter with her insurance applications.
“I find a lot of success when I guide underwriting,” said Massatti, a seven-year MDRT member from Lancaster, Ohio. “I start with the good lifestyle first, and then go into the medical. If you lead with the good, it’s a first impression. I like to lead and guide rather than, ‘Here’s an application; you know nothing about them. They’re on high blood pressure meds and Zoloft for anxiety.’ With a cover letter, you’re controlling what underwriting thinks before they put it on paper.”
5. Reconsider accelerated underwriting
The idea of accelerated underwriting, where the application process is completed in 24 to 48 hours, sounds good, Massatti admits, but when she used it, she had more ratings and denials than ever before.
“I’ve had healthy young individuals declined because they look at things like credit history, which has nothing to do with their health,” Massatti said. “That was my biggest eye-opener. I don’t do accelerated underwriting anymore, because I don’t know what they’re looking for. It’s more than just prescriptions and their driving record.”
I’ve had healthy young individuals declined because they look at things like credit history, which has nothing to do with their health.
— Kasey Massatti
6. Take a trial run
Some advisors, when they anticipate underwriting challenges, ask the client to fill out a pre-application. Kaelberer works with a broker-dealer who offers two different underwriting programs. One is done with a number instead of the client’s name, so if they get a decline, it doesn’t go on their record.
The second option is to send it for underwriting through the broker-dealer, who will determine the best approach. “This way, we know upfront before the formal application,” Kaelberer said. “We explain to clients that we’re doing this so they don’t get a decline.”
Asvin Chauhan, Dip FP, MIFP, will sometimes do multiple applications if he anticipates a problem. “We get a short version of the questionnaire and send it to all the insurance companies as a pre-application process,” said Chauhan, a 20-year MDRT member from Coventry, England. “Companies will look at it without further medical information and tell you if there will be a problem.”
7. Challenging a rating
If a client’s application comes back with a rating, Avery tells them one of three things could happen by challenging it: no change, a change for the better or a change for the worse. “So let’s accept the rating, and they can’t come back and change it for the worse if something else pops up,” Avery advises clients. “But if it’s a false rating, they can come back and change it for the better.”
Avery has clients who took steps to a healthier lifestyle, such as losing weight and keeping it off, which later reduced the rating.
Chauhan has also challenged ratings, usually when the reason for the rating or decline is borderline. “Often it’s a previous condition that they haven’t had in a long time,” he said.
Chauhan will tell the client what happened, gather further supporting information and send a letter explaining this to the underwriter. He had one client who had previously been prescribed blood pressure medication. At the time he applied for insurance, he was fit and active.
“The client went back to the doctor and got a report with all sorts of things in there — the client’s diet, weight, current health. He sent that to us and we sent it to the underwriter and the rating was removed.”
Massatti works with an underwriting team that is aggressive at going back and challenging ratings. She had a client who had a heart attack when he was young. Her team went back to the underwriter three times with information about the client’s longtime good health since the heart attack. “We told them, ‘He’s not having issues now, he has a healthy lifestyle, he continues to follow up with his doctor,” she said. The rating was changed from a table rating of F to a rating of B thanks to their persistence.
CHALLENGING HIS OWN RATING
When Asvin Chauhan explains the underwriting process to clients, he often shares his own story. Fifteen years ago, Chauhan underwent a series of tests. Unfortunately, the doctors diagnosed him with impaired renal function due to kidney problems.
“I got on a series of medications,” he said. “Ultimately my functions increased, and the doctor signed me off.”
Despite the clean bill of health from his doctor, when Chauhan applied for insurance years later, he received a rating of 50 percent, which the underwriter said was accurate based on the book they used to rate medical issues.
Chauhan went back to the underwriter and told them, “You’re rating me based on a book, not my lifestyle. I was told to lose weight and I did. I was told not to drink and I don’t. My diet is quite good. I exercise. My kidney function is up.”
The result? The rating was removed.
“I didn’t think it was fair that I was rated, so I challenged it and they removed it.”