-by Heather Krohn FALU FLMI
Accelerated underwriting is a new and growing trend that offers important advantages over other programs allowing for an insurance qualification process that does not require examinations or fluids. Having an approved policy in hand can occur in a few business days, rather than weeks, and product pricing is typically more favorable with many carriers offering their full suite of off-the-shelf products with no compensation haircuts. These are all positive factors associated with accelerated programs. However, since most accelerated programs are a triage process, there are no guarantees an applicant will make it through the process without the need for exam/lab results or other traditional underwriting requirements.
There are many factors that make the accelerated programs unique. Therefore, it is important to understand what should be done to position the accelerated process effectively with clientele (without the promise they will forgo lab/exam or other underwriting requirements). Remember that accelerated underwriting is an opportunity only, not a guarantee. Prescreening applicants is a must to ensure the most successful outcomes.
Principal Life was the first large insurer to introduce accelerated underwriting to the insurance market about two years ago, with much success. Very recently there have been new accelerated entrants in the market from Lincoln National, John Hancock, LGA (Banner/William Penn), and SBLI. It is rumored that at least three major players will be introducing similar programs in the near future, and one reinsurer has gone on record stating an additional 22 insurers are currently developing an accelerated process. If the trend continues, eventually every insurance company will need to have an accelerated program to compete in the marketplace.
So what is accelerated underwriting and how does it work? What are the benefits of this process and how can you increase the odds a person may qualify?
First and foremost, accelerated underwriting is defined as permitting applicants who otherwise qualify for preferred or better rate classes to be potentially underwritten without the use of traditional medical evidence such as paramedical exams and lab testing.
It is extremely important that the agent properly vet potential applicants. Fact finding and field underwriting are imperative in order to determine if the prospect is likely to qualify for one of these accelerated programs and to set realistic expectations with the client. Agents must understand and properly relay to their clients that these programs allow a potential opportunity for exam-free/lab-free underwriting, but it is not a guarantee. While many programs allow insureds up to the age of 60 to apply, approval rates rapidly decline for those 50 and over, especially for men.
Face amounts vary to some degree, but most carriers offer coverage up to either $500,000 or $1 million. There are some insurers that offer accelerated underwriting for their entire traditional product suite while others have developed special product offerings for their streamlined programs.
Becoming educated about how these accelerated underwriting programs work is necessary. First of all, there are a variety of application methods. While insurance companies such as Principal allow the use of their regular paper application, this is not the norm. Most companies require some sort of electronic or drop ticket submission to access the program and this is non-negotiable. After the application has been submitted most carriers require some sort of client tele-interview to take place. Insurers will use the interview responses along with the MIB report, RX database check and MVR to determine if the client can be approved without further evidence.
One insurer reports that they are able to approve up to 55% of applications on an accelerated basis. If an insured is not approved, they will be given the option to submit to additional testing such as physical measurement and labs to proceed. Just because an insured requires full underwriting does not mean that they cannot qualify for the applied for rate class. It just means that the carrier requires more evidence in order to get there. There are also some programs that have random built-in holdouts. This basically means that there will be a certain percentage of insureds that will be required to go through full underwriting for quality control purposes even though they would have qualified otherwise. Knowing which programs are subject to this can help agents set proper expectations with their clients.
There appears to be little downside to trying one of these programs, especially if you have a healthy insured under the age of 50 applying for $1 million or less of coverage. At best, the client qualifies for insurance with minimal and noninvasive underwriting. At worst, the insured will have to submit to usual lab testing and examination. As long as candidates understand that these programs are potential opportunities and not guarantees, there is nothing lost in starting with an accelerated approach.
As the industry moves towards more automation, it is important to stay informed and aware of all of the new offerings that are being made available and how they might not only benefit your clientele, but you as an agent.
If you have any questions about the specific accelerated programs, how they work, and which may be the best fit for a particular client, please contact Windsor for assistance.