Delivering on the Promise of Tele-Underwriting (Page 2 of 2)

Why the Interviews by Underwriters Model Works

Co-author, Lynn Dreist, FLMI, has experience both as a Home Office Underwriter and as a tele-underwriting interviewer and has found the interviews by underwriters model to be an extremely effective tool. Having come from over nine years in a Home Office setting, my exposure to phone interviews had been with in-house inspection units and vendors that utilize non-underwriter personnel. While the inspections provided occasional “hits” that changed the course of my underwriting, my overall experience was that the details provided in these interviews had little impact on my underwriting decision.

If a new health history was noted, it was often not developed completely enough to take final action, which meant ordering an APS to rule out any concerns. Conversely, the interviews by underwriters model approaches phone interviews from a risk assessment perspective, rather than an information gathering one.

The focus in the interviews by underwriters model is on obtaining the specific details necessary to take final action on a case. This is especially true when a new medical history is presented by the proposed insured. An underwriter conducting the interview can obtain critical details, which in turn allows the Home Office underwriter to accurately assess the risk, in many cases without an APS.

“When experienced underwriters conduct the phone interviews, they know what’s important,” said Jonathon Kuhar, underwriter II at ERIE Family Life. “Their knowledge about health-related matters creates a sense of trust, which allows them to establish a conversational tone that is comfortable and encourages the applicant to open up.”

According to Rick Gordon at Midland National, this comfort level increases customer satisfaction with the underwriting process, something that is sometimes overlooked in the quest for greater productivity and cost reduction. “In the traditional tele-underwriting model, interviewers go through all the required drill downs without considering the relevance of the questions,” said Gordon. “We’ve received complaints from applicants that the drill downs go into effect regardless of what the medical history is. The interviewer isn’t able to differentiate between when they need the added detail and when they don’t.”

The flip side is that experienced underwriters also detect early on in the interview whether or not a case is going to require an APS. For instance, if an applicant has multiple impairments, the underwriter conducting the interview can quickly determine which physicians to order an APS from that would have the most bearing on the underwriting decision. Or, if an applicant provides a medication history that is inconsistent with the disclosed impairment, the underwriter can pick up on it and go off-script very comfortably to probe more deeply.  

When To Use an Interview By an Underwriter

Dreist’s role in both conducting more than 3,500 phone interviews with applicants and reviewing completed cases from other IBU underwriters has revealed that Home Office underwriters are shifting from ordering an APS to using an interview by an underwriter for common impairments, such as hypertension, psychiatric and gastrointestinal disorders, and asthma.

As a tool, interviews by underwriters are most effective when used appropriately. The question is when to use an interview by an underwriter versus when to order an APS without compromising the protective value.

There are obvious medical impairments that will always require an APS. However, if on initial review an underwriter anticipates declining a case, an interview by an underwriter is often a good first step. This is especially true for informal applications. An interview by an underwriter can help a Home Office underwriter make a tentative offer. If at that point the agent feels a rated case cannot be placed, the file can be closed without incurring the additional expense of obtaining medical records.

To assist Home Office Underwriters in using interviews by underwriters most effectively, a comprehensive guideline was developed based on 15 human body classifications and 216 impairment-specific subcategories. By combining a guideline along with the gut instincts of the Home Office Underwriter, the Home Office Underwriting department can begin to utilize the model of using an interview by an underwriter in lieu of ordering an APS.

For example, in most cases of hypertension, Dreist suggests ordering an interview by an underwriter on initial review. Most proposed applicants are able to provide a date of diagnosis, frequency of follow-ups, pre-treatment and average blood pressure readings, current medication, and any medication adjustments necessary to control blood pressure. This information, in conjunction with current readings gathered from the paramedical exam, allows Home Office Underwriters to accurately assess the risk and take final action. There are, of course, hypertension cases where we would recommend ordering an APS on initial review. For example, such cases include when hypertension is combined with a disclosed history of renal or peripheral vascular disease, diabetes or significant CV factors on exam.

The following chart outlines how the guidelines would apply to for case involving the impairment of hypertension.

Classification	Sub-category	Recommendation
Cardiology	Hypertension	Order an interview by an underwriter unless any of the following are disclosed: Known renal disease Currently pregnant with significant BP elevation on exam History of significant cardiac or vascular disease Smoker age >50 with recent or sudden onset Age >60 with recent or sudden onset Individual >40 with several significant CV risk factors present on exam

In addition to impairment guidelines, individual companies are developing their own internal guidelines based on the age of the applicant and the face amount of the policy. “If you’re dealing with the 65 plus market, the APS is more likely to be asked for more often,” said to Jay Mauri at ERIE. “We have a fairly young group that we insure with moderate sized policies, which makes it appropriate for us to use interviews by underwriters. In addition, doctors today are treating more quickly than they used to. They are prescribing medications more readily. If someone has blood pressure barely into high normal, they’ll prescribe a blood pressure pill. What the interview by an underwriter does is to help us weed out those people who have received treatment but don’t have a serious impairment.”

Midland National initially established a guideline to use interviews by underwriters for cases involving applicants aged 20-45 with $500,000 face amount, and for ages 46-60 with $250,000 face amount. “At this point based on our experience with the interviews by underwriters model, we see opportunities to expand these parameters,” said Gordon. “We’re now looking at using it for the 61-65 group with $100,000 face value. The feedback from our underwriters has been absolutely positive because of the high level of detail that we’re getting.”

The bottom line in determining how best to apply the interviews by underwriters model, according to Mauri, is to first understand the business you have. “The thing a VP of Underwriting should ask himself is, where are you ordering APS’s now? Of those that came in, how many were examined and what were the results? What’s your distribution source? What’s your mortality right now? What’s your age and product distribution? You have to look at all of these things in order to establish an effective process for underwriting.” 

Conclusion

Over the last four years, companies that have used the interviews by underwriters model to conduct telephone interviews have experienced measurable bottom line impact on time service and underwriting capacity. Most interviews are completed in less than three days, versus an average 20 days for an APS. Good risks get on the books faster – before the inevitable buyer’s remorse that life insurance applicants experience if the case is pending too long.

Of course, faster time service also means happier agents. Companies are competing for distribution with faster time service and commissions to provide an edge over the competition. With fewer APS’s to read, the Home Office underwriting department is able to increase it’s underwriting capacity without the difficulty and expense of hiring experienced underwriters.

Companies using underwriters to conduct telephone interviews also gain the benefit of reducing their new business acquisition cost. With an average cost of an interview by an underwriter at $26, the cost advantage is significant over the average cost of an APS.

Whether Home Offices use in-house underwriters or they outsource to a vendor that uses experienced underwriters to conduct telephone interviews, it offers a win-win solution, according to Mauri. “We’re spending less time on the cases that don’t need it, which allows us to spend more time on the cases that do. All the way around, it’s saving us time and money.”

About the Authors

Lincoln Tedeschi is founder and president of Interviews by Underwriters (IBU) Inc. An innovative concept in life and health underwriting, IBU has established the model for using experienced, professional underwriters to conduct phone interviews with insurance applicants. Lincoln is a well-known and respected leader in the utilization of life/health insurance underwriting talent. He began his career in 1986 as a District Agent for Prudential Life, where after just one year he was promoted to Sales Manager responsible for recruiting and staffing five agencies. The role gave Lincoln broad experience that, in 1992, led him to become a recruiter with RJS Associates. There, he specialized in recruiting professionals from line underwriters to vice presidents for life and health insurance companies throughout the country. In 1999, Lincoln conceived of and established IBU with the vision to tap into the talent of underwriters who wanted to work from home to conduct telephone interviews for Home Office Underwriting departments. Lincoln is a Certified Personnel Consultant and holds a BA in Economics at the University of Connecticut.

Lynn Dreist, FLMI, is the director of underwriting research at IBU, Inc. In her two years at IBU, Lynn has personally conducted over 3,500 telephone interviews with insurance applicants. In her role with the company, she is responsible for both completing interviews and reviewing completed cases from other IBU underwriters. Recently, she finished a research effort to compile a comprehensive guideline to assist underwriters on when to order an interview by an underwriter versus when to order an APS. Lynn joined IBU with over nine years underwriting experience after working with major national carriers including Northwestern Mutual Life, American General and Milwaukee Life in Milwaukee, WI. Lynn holds a BA degree in English from the University of Wisconsin-Madison.