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© 2004 Hartford Courant Reprinted With Permission.
ARTICLES - The Hartford Courant
Tell-All Phone Calls
East Hampton Firm's Home-Based Underwriters Strive To Get Information
Fast, Cheaply For Life Insurers
June 13, 2004 - The Hartford Courant, Sunday Business Section
By DIANE LEVICK, Courant Staff Writer
Consumers probably wouldn't want to discuss their medical problems with a stranger on the phone, least of all a nosy insurance underwriter.
But when IBU Inc. calls, they often spill their guts about the most personal details - anything from asthma or alcohol use to prison time - as part of their application for life insurance.
East Hampton-based IBU employs 28 experienced underwriters nationwide who work at home for an average of $20 an hour, interviewing applicants for life insurers who seek a cheaper and faster way to evaluate medical risks.
Normally, if something on an application raises questions about a consumer's health, an insurance company would order an "attending physician's statement," or APS. An APS, which gives detailed information about a patient's medical problems, can cost an insurer $50 to $80 - and take three weeks or more to receive.
IBU - which stands for Interviews By Underwriters - charges $25 to $30 per interview, depending on volume. The firm can complete three-quarters of its interviews within three days, although finding more elusive applicants could take a week or more, says Lincoln Tedeschi, 41, who founded the private IBU four years ago while he was a headhunter for life underwriters.
The interviews uncover information that helps firms weed out people who are too risky to insure and determine which ones should pay higher premiums.
On the flip side, the interviews also help companies insure more people despite medical problems by gathering details showing that they have conditions such as diabetes and asthma under control.
Although IBU is relatively young, customers say the firm has saved them money and increased efficiency. And they're impressed with the underwriters' interviewing abilities.
The interviews with applicants are an eye-opening study in honesty and dishonesty, filled with enough human drama to make underwriters chuckle or nearly cry at times.
"I don't act shocked by anything they have to say," says Lynn Dreist, an IBU underwriter in Genesee, Wis., who used to work for Northwestern Mutual.
"You have to show compassion," Dreist says. "If you react strongly, then they might change what they were going to say or change the way they were going to say it."
About a year ago, for instance, Dreist had to probe an applicant's felony history. She asked him about convictions, and got the answer, "Everything, pretty much, except first-degree murder."
He also volunteered that he drank a fifth a day, but that he hadn't used crack cocaine in two weeks. "He was so proud; he was trying to cut down," Dreist recalls.
No surprise - he was turned down for insurance.
Dreist remembers another man she interviewed who confessed many personal details, and said, "I give you more information than I give my priest."
What makes people unload to a faceless interviewer?
Sometimes with depressed or older people, Tedeschi says, "their seed of loneliness goes away when they talk to this pleasant female voice."
All but two of IBU's underwriters are women. "People are more responsive to a person who conveys themself well, who shows empathy and emotion," Tedeschi says. "There are men who can do that, as well," but, he says, "If you were to pit all the women against all the men, the women would win."
Dreist says she tries to gain people's trust, and they feel more comfortable once they realize she's knowledgeable about their conditions and medicines.
People also feel comfortable, she adds, "that we're not on the phone judging them."
Mary Lou Brignano of Coventry, another IBU underwriter, finds that the order of her questions can make a big difference. If a person has a disability and tells her what it is, for example, "I skip right over it and act like I'm not concerned," she says.
"Then I go on to the next question, then I come back to the disability and go for the guts," Brignano explains. "And they're fine by then, ready to talk. They're not ready to talk at the very beginning and spill their guts until they feel more comfortable."
When it comes to rooting out the truth, underwriters have a little-known tool: MIB Group Inc., a clearinghouse in Westwood, Mass., that gathers medical information from insurers on people who have applied for individual life, disability, health, or long-term care insurance. About one in five consumers is likely to have a record with MIB.
When life insurers get new applications, they may contact MIB to see whether the applicants have health conditions they haven't disclosed. Insurers aren't allowed to reject consumers based on an MIB report alone.
So insurers would share the results with IBU underwriters, who could then pursue the details that MIB doesn't have.
The coding of MIB data isn't foolproof, though, as one IBU underwriter found.
One woman's case was coded as "cirrhosis," so the IBU employee kept prodding her about possible liver disease and drinking problems. The woman kept denying anything that would indicate cirrhosis, but finally volunteered, "Well, I did have a little psoriasis" - a skin disease.
"Only an underwriter's going to figure that out," Tedeschi chuckles.
Underwriters' knowledge of prescription drugs has also ferreted out health problems that an insurer might never have known about.
In a recent interview with a Vietnam veteran, Brignano recognized that a drug he mentioned was for depression - which wasn't the condition that the insurance company was worried about. When Brignano pressed for details, the veteran told her he'd suffered from post-traumatic stress, had been suicidal or homicidal on a daily basis, and had been in and out of institutions for 20 years.
IBU's interviews often uncover details that aren't on the medical questionnaires that are part of the application process, Tedeschi says. Insurance agents may rush through the questions with their clients, and some agents may omit information that might impede a sale, he says.
Most of the time, IBU underwriters say, consumers seem to be telling them the truth in interviews. Sometimes, though, the truth requires a bit of drilling.
Brignano remembers this exchange with a consumer: "Do you drink alcohol? Yes. How often? Not often. OK, how much is not often? Well, six to 10 beers a day."
"It's all in the definition," says Brignano, who worked 11 years for the former Travelers Insurance.
Dreist says she picks up subtle cues that indicate people aren't completely forthright. Sometimes it's the way they hesitate, or "They'll kind of laugh when they give me an answer. Sometimes you can tell it in their voices."
She says she tries to give people a second chance during the interview to be honest. Sometimes they'll come clean, saying she just jarred their memory. Some say they didn't initially disclose a fact because they didn't understand it was relevant to her question.
The rapid-fire pace of the interviews helps elicit the truth, too. They typically take 10 to 15 minutes, but can run longer.
"It doesn't give them a whole lot of time to make stuff up," Dreist points out.
IBU customer Midland National Life is evaluating the accuracy of the firm's information gathering by ordering an APS on some people after issuing them insurance. The Sioux Falls, S.D.-based insurer wants to see whether its decision on an applicant would have been any different if it had used an APS instead of IBU.
"Early results are quite promising" for IBU, says Rick Gordon, assistant vice president of underwriting and chief underwriter for Midland. "I think they're able to build rapport. I think they've got credibility because they understand conditions and what we're looking for."
Midland still uses an APS for serious problems, such as a history of cancer or coronary disease. But the insurer, which started using IBU last summer, is ordering about 325 IBU interviews a month, and is saving roughly $10,000 a month, compared with APS costs, Gordon says.
Erie Family Life Insurance Co. in Erie, Pa., believes consumers will benefit from the company's using IBU at $25 a pop instead of $75 to $80 for an APS.
"If we can reduce costs, I can reduce my rates," says Jay Mauri, vice president and manager of life underwriting for Erie.
Erie Family Life isn't turning more people down because of IBU, Mauri says. Instead, he notes, "We've been able to determine more people can be insured at good rates, sooner."
The quicker turnaround from IBU, companies say, also helps avoid "buyer's remorse" - customers having second thoughts about buying a policy or opting for a company that's quicker to quote a firm price.
Life insurers often hire call centers manned by non-underwriters to do what IBU does, but aren't always satisfied with the results.
"Our experience with that has not been good," Gordon says. "We weren't finding the quality of the interview we needed to have confidence to make decisions [based] on the information."
Tedeschi took note of such discontent when he launched the IBU idea four years ago, while still working as a headhunter for RJS Associates in Hartford. As IBU grew, he left RJS in July 2002 to devote himself full time to his new firm.
Tedeschi, who works out of his East Hampton home, says he has invested $50,000 to $75,000 in IBU - the biggest expense being a secure, Web-based system.
IBU's payroll is about $30,000 a month now. Its underwriters are paid by the case, usually making about $20 an hour, and there are no employee benefits.
The firm, however, has attracted many female underwriters who want to remain in the business, but devote more time to family. IBU work, Tedeschi stresses, requires evening hours because that's when people are reachable.
He expects IBU to post revenue of nearly $1 million this year, up from nearly $700,000 last year. And he projects a profit this year of $250,000 to $300,000.
IBU's clients include Allstate, Horace Mann, Utica National and Gerber Life.
IBU has already spread its tendrils.
The firm has several clients in the United Kingdom. Also, the firm is offering its underwriters' services to summarize attending physician statements for busy insurance companies.
In addition, Tedeschi has partnered with a U.S. firm whose workers in India conduct interviews that don't require an underwriter's expertise. IBU charges clients $9.50 for each of those interviews, which deal with non-medical subjects, such as a person's finances or hobbies.
Looking out three to five years, Tedeschi hopes that IBU will handle full underwriting for some insurers - the power to choose customers and determine what rates they qualify for.
He's not anticipating a public stock offering, having no great need for capital.
Besides, he says, "Frankly, I'm young and having fun; I'm not looking for an exit strategy right now."
© 2004 Hartford Courant Reprinted With Permission.