The no good, ugly, scary future of life underwriting

-by DuWayne Kilbo

The tension is palpable.

Underwriting is being turned on its head, driven by big data, automation, alternative risk assessment tools, and more predictive underwriting models and processes augmented by analytics.

Go to any underwriting industry meeting and there will be considerable time and energy devoted to one or more of these topics, along with a fair amount of angst among the underwriting folks present.

Traditional and new industry players speak about the latest risk assessment models and tools, back-tested through hundreds of thousands of client records and data points, producing mortality results similar to existing methods at a fraction of the cost and in light speed when compared to most existing underwriting processes.  In addition, these new tools require less, and sometimes no, human underwriting intervention.


A new world of life underwriting is being ushered in. And it’s scary for the underwriting profession.

Driven by the under-served and uninsured markets, aging and shrinking producer distribution models, increases in carrier retention (with a focus on mortality as a profit center), a need to find new sources of revenue, direct to consumer distribution models, and technology players promoting lower cost and faster underwriting methods, the table has been set for change.

For the underwriting profession change was needed, and some would suggest long overdue.  Underwriting has been pretty much “business as usual” for the past 25 years. Today, long waits of up to several weeks typically occur for a policy to be approved and issued—even for simple, modest face amount cases.  No business or industry can expect to be successful or even survive long-term using this type of model.

On top of this, consumers, especially younger buyers, are demanding a better insurance acquisition experience, and don’t care about the disruption that creates for the life industry and its various players.  Though it may be an overstatement to say that traditional life underwriting is facing an existential threat, it could go down that road if the industry doesn’t adapt to customer needs and wants. The industry needs to keep things affordable, and make processes faster and easier for the insurance buying consumer.

So what does this mean for the life underwriting industry?  Is this no good, ugly, and scary for the underwriting profession?

In some respects, yes.

But in more important aspects where underwriting talents and skill sets are essential, no.

First, with new data sources and underwriting tools, predictive models, automation, and perhaps even artificial intelligence, the demand for underwriters—on a pure numbers basis—will be less.  This will be viewed as a negative by some, and certainly doesn’t feel good for the people impacted.

It’s absolutely necessary to automate and streamline as much as possible in ways that make sense and provide value to the customer.  No business survives or even thrives without addressing what customers need and how they want services or products delivered, with much of the delivery achieved through automation. This may require fewer underwriting resources, and it is inevitable.

However, while automation, predictive analytics, and other newer tools lend themselves to clean cases with reasonable face amounts, they don’t necessarily provide the same level of comfort for large face amount and medically impaired risks.

These latter cases require high level human intervention, where complex thought and interaction are required.  This is what underwriters provide to the risk appraisal process. Also, these things are difficult, if not impossible, to program into algorithms. While new tools and data sources may add to or support decision-making and perhaps streamline processes, mispriced mortality is unforgiving. Replacing the human element in these situations is risky and very unwise.

Second, besides technical skills, underwriters possess “soft” human interaction talents to create loyal customers and repeat business. Through their knowledge, understanding and engagement, underwriters have unique perspectives to interact with carriers, and among sales organizations, producers, customers and others.  These skills are extremely valuable and cannot be algorithmically programmed.  Just try to create any type of dialogue with “Siri” or “Alexa” and you’ll see what I mean.

Lastly, underwriters provide leadership to help guide their organizations and industry through challenges and to the next level, especially concerning mortality-related issues.  Some underwriters are very good at doing this within their organizations and industry, while others are not.  For those who are not it is imperative that they get better.  And some companies are very good at inclusive decision- making, while others are not. In either case, underwriting must find or create a place at the table to have an impact on the direction of their companies and the future of the life insurance industry.

The future for underwriting in this writer’s opinion is exciting—not “no good, ugly, or scary.”

With any change comes opportunity.

There is so much to be done and accomplished.  By learning new skills and uncovering new talents to propel the profession and industry forward, underwriters can provide additional value to their organizations and to others. This may include learning things beyond what they do today, such as statistical analysis, data applications, products, illustrations, sales concepts and more, providing fresh perspectives and new solutions for their organizations, customers and production sources.


For over 40 years, Windsor has responded to change in ways that created new advantages and opportunities for everyone we work with.  It’s what we do.

Now is the time for revitalization.

The future doesn’t need to be scary.







An Interview with DuWayne Kilbo and Marc Schwartz: Why You Need to Review Your Clients’ Policies Now.

In our previous two blogs, Marc Schwartz talked about how pricing adjustments among a few life insurers had created an “out-of-control” environment for some of our clients.  In part two of “Putting Clients Back in Control,” Marc explored several product solutions that can help put your clients back in control – but for you, what’s most important is knowing first what your clients want out of their life insurance policies.  Here, Marc and DuWayne Kilbo discuss why you need to review your clients’ policies now.


The idea and process of Policy Review has been around forever. Why is it so important now?

Marc:  There has been a lot of negative press around life insurer pricing adjustments, and that has created an environment where your clients need the reassurance that you’re aware of the issues and you’re looking out for their best interests. With the recent reductions in dividend rates from the mutual companies, the various COI issues in 2016 and spread compression because of the overall interest rate environment, the need to reach out to your policy owners and your centers of influence is more important than ever.  This should basically be a business development activity for all life insurance professionals and advisors in 2017.

Related: New York Times: Why Some Life Insurance Premiums are Skyrocketing

You mentioned recent reductions in dividend rates. It seemed for a while that dividends were floating above the interest rate drops.  What’s changed?

DuWayne:  It took longer for the sustained low interest rates to significantly affect dividend rates, but recently we’ve seen a cascade of dividend rate reductions from most if not all of the major carriers.  One carrier has experienced a 33% drop in dividend rate over the past nine years, which corresponds to comparable seasoned triple-A bond rates over the same period.  Additionally, the policy expense component in participating policies is adjusted independently of the dividend rate, and many carriers are, or will be, increasing those rates as well.

Chart: Historical Life Dividends: 1988 to 2017

So what should be the next step for an agent or advisor?

DuWayne:  First and most importantly, to confirm with their clients that they’re in sync as to the purpose and goals of their insurance.  Clients often have older policies, or have acquired policies from other sources, and reviewing the entire life insurance and annuity portfolio, with the client’s goals in mind, is priority one.

Marc:  For participating plans where dividends play such a big part, agents should review the initial projections that were used in making the sale – chances are that the policy’s performance has fallen short in some ways, especially for policies issued 10-20 years ago.  Paying particular attention to the distribution side, if that was a high priority for your client, means looking closely not just at the numbers, but at the contractual loan provisions as well.

Article: “Under Control: Five experts discuss how annual reviews can realign clients’ insurance portfolios . . . and calm their nerves”

So policy reviews are critical in determining if policies are performing as needed – and will alert stakeholders if adjustments are required to get “back on track.” Are there other reasons to review a client’s life insurance portfolio?

DuWayne: Yes, absolutely! Besides underlying product performance, policy reviews provide an opportunity to audit “structural integrity” of the life insurance portfolio. In other words, think of this as a planning review in addition to policy review. Is the amount of coverage still relevant?  Are ownership and beneficiary designation properly set up? Have key documents (trusts, split-dollar, buy-sell agreements, etc.) been executed and are they still current? Has the client’s health improved and should the existing underwriting class be reviewed?

Marc:  Raising awareness and identifying areas of potential vulnerability will win trust and credibility with professional advisors and other centers of influence. Also, CPAs, attorneys and bankers are much more comfortable having this kind of service-oriented discussion with clients rather than one which might sound like a sales pitch. At the end of the day, it will all come back to whether the existing policy is doing the job or not.

And if a review indicates a need for a change, what options are available?

DuWayne:  In situations where premium cost and cash value performance have become more questionable, there are several options that can create face amount stability as well as upside cash value opportunity.  These include 1035 exchanges to newer products with baseline guarantees and potential market-indexed cash value growth, 1035 exchanges to policies that can accept sizeable outstanding policy loans and minimize adverse tax consequences, along with many other creative alternatives.

Where can agents and advisors get some help on this?

DuWayne:  That’s what we do.  Windsor is dedicated to help agents eliminate the hassle and uncertainty that can upset a client’s plans, and determine their best course of action going forward.  We have experienced and knowledgeable industry resources who can analyze the situation at hand and develop suitable alternatives.  We are expert in case design, carrier/product access and underwriting to drive the best case offer.

Marc:  And we have an outstanding service platform to help steer your applications through the roadblocks that sometimes get in the way of issuing a policy.  There’s no problem we haven’t seen and solved in Windsor’s 40 years serving life insurance agents and their clients – which means that agents can be confident that we’ll handle the back room, and they can focus on what they do best.  For starters, we’ve provided this link to a basic policy review fact finder that agents can complete and email or fax to our Policy Review team.  With all the changes swirling around the life insurance industry, now is the time to go back to your clients and reconfirm your commitment to their financial future.

When Two Plus Two Equals Zero: Simultaneous Applications and Competing Production Sources

– by DuWayne Kilbo

You’ve met with the clients and their advisors on a few occasions and the time has come to take an application and submit underwriting information to the carriers.  However, what you hear next stops you cold:  “Our son’s friend is also in the business and we want him to shop our application as well to be sure we are getting the best offer and premium available.”


You pause and think.  For several reasons you know that it’s never a good idea to pit production sources against one another with multiple carrier submissions. It can complicate matters and often results in an inferior offer and a higher premium rate class.  Also, in large case situations it may lock out the clients from getting the coverage they want and need.

You ask yourself, how do you dissuade your clients from this course of action? What are the issues with this approach?  Isn’t competition a good thing?

Absolutely, competition is good!  It makes us all work harder to provide unique value for our customers.  However, in the life insurance industry the competitive selection process to obtain the best results and value takes place prior to carrier submission of any applications. And it starts and ends with the producer selection process.

This isn’t necessarily intuitive to our clients or to most anyone outside the life industry.  Why shouldn’t applications be shopped to the same carriers via multiple production sources?

Carrier price and ultimate client value are a function of three things:  1) the stated carrier product pricing, which includes illustrated values and pricing for preferred, standard and other rate classes; 2) the carrier’s product strength and how it aligns with the client’s goals; and, 3) the final negotiated underwriting class.   Thousands of financial professionals work through Brokerage General Agencies (BGAs).  From a carrier’s point of view, the combination of producing agent and BGA is viewed as a single “production source.”  Many BGAs and agents are equal in terms of acquiring and illustrating carrier product pricing. That’s the easy part. However, where BGAs are not equal and where great value is created is in the strength and ability to negotiate the most favorable underwriting rate class.  Certain BGAs – especially those with underwriting expertise “on staff” who can capably interface and negotiate with carrier underwriters – maintain a distinct advantage to provide exceptional offers and ultimate client value.  If an underwriting rate class can be negotiated from an otherwise standard to a preferred, product value can be significantly enhanced.  At times one can achieve 20% or more client value in terms of lower premium payment and/or improved product performance.

You may ask, won’t a carrier simply match offers if an application is submitted to them from more than one source?  The answer is yes, and this is where a potential pitfall lies. If the agent chooses a BGA that has a proven track record of strong underwriting success and negotiation skills and if the client allows the agent to access the insurance market before information is submitted by any other agent, then all is fine–there’s a good chance that the best possible offer will be negotiated.  However, if the information is first submitted to and quoted on by a carrier without benefit of strong hands-on negotiation, then the opportunity for exceptional client value passes—sometimes forever.

Why does this occur?

While the ultimate customer for a life insurance carrier is the insured or policy owner once a policy is issued, during the application process a carrier’s customer is the agent.  In view  of this and for reasons relating to concerns such as channel conflict and avoiding the “appearance” of producer preference, all carriers are very careful about keeping all production sources on a level playing field—especially when it comes to providing underwriting offers on an applicant.  Once an offer is provided, a carrier will not change their underwriting decision unless additional “meaningful” medical information (and in financial situations additional financial detail) is provided that will sway their opinion.  In most cases this hurdle is nearly impossible to overcome.

Because the producer selection process takes place prior to an application being submitted, a critical selection criterion is to choose a production source that has the skill, ability and track record to negotiate the best underwriting offer.  Essentially, the clients and their advisors must employ the agent that has the greatest opportunity for success to take control and submit the application to the insurance marketplace—before anyone else. In large face amount situations, this critical decision-making step can save an applicant tens to hundreds of thousands of dollars during the life of a policy.

In addition to negotiating the best offer in very large case situations, the client must choose an agent who is capable of putting together large total lines of coverage.  This requires a special skill set because these “Jumbo” or extremely large total line cases typically involve several different carriers as well as reinsurance. Many sets of eyes review these situations because of their bottom line impact upon carrier mortality, and several parties weigh in on the ultimate decision to issue coverage and at what price.

Why does this matter?  Can’t one simply buy what they want and need?

Yes, to a degree depending upon case detail and circumstances. However, no matter what is applied for, it must be done right.

There is a limit to the amount of coverage available for any one individual in the U.S. life insurance industry.  Anecdotal evidence for the most favorable cases suggests this to be in $330 to $350 million range, which includes most direct carrier and reinsurance capacity.  This is a significant amount of coverage, but it is very closely monitored for what an applicant may financially qualify based upon carrier underwriting guidelines, and balanced with the amount of available industry capacity.

On the largest applications, beginning in the $30 million plus area, very few carriers have the ability to retain all the risk on their own books – nor do they want to.  All carriers, including both small and large retention companies, don’t like and can’t afford quarterly mortality hiccups caused by large claims. To help manage these situations, coverage is spread out to reinsurers.  This allows the carriers to diversify their large face amount risks and smooths any mortality spikes that may occur.

So putting together the large total line case requires keen insight into what the insurance market can deliver in terms of offers and capacity.  If done right, an applicant may achieve the greatest amount of coverage they may qualify for (capped by industry capacity) and at the best rates possible.

So what does a producer need to know to successfully deliver optimal value in the large case market?

There are two things to be familiar with. The first is case control.  In the large case market, application control is critical.  This involves choosing a BGA that has the skill and ability to control the entire application process for all carriers before any applications are submitted.  Because of the complexity involved, this is no small task.

Large total line case submission requires a clear understanding of what is being applied for and with which carriers. The carriers and their reinsurers get extremely uneasy about situations where there are competing agents and applications and where the potential for case control appears compromised.  Their nervousness stems from the fact that more coverage may be issued than anticipated, with the potential for financial underwriting guidelines to be breached and/or carrier and reinsurance retention and automatic limits exceeded.  Neither of these situations is good and may cause a carrier to refuse to underwrite an applicant altogether.  Some of these situations may be unwound to the point where the carriers may once again be willing to consider a risk, but they take an inordinate amount of time and effort and often the end result is not as favorable as it could have been if handled properly at the outset.  In order to combat this situation, there needs to be complete clarity and understanding of what’s being applied for, and control must rest in the hands of a single production source with the skill and ability to manage the entire process.

The second thing to know is how to maximize capacity at the best rates possible.  As mentioned earlier, this involves having the ability to negotiate the best possible rates.  However, this also requires choosing a BGA with the knowledge and insight into carrier products, and having experience and proficiency in the areas of carrier underwriting niches, retention, automatic reinsurance limits, super pools, Jumbo limits and reinsurance relationships.  Since most carriers have a Jumbo limit of $65 million, one of the keys to any case above this amount is to negotiate the best possible offers with all carriers and then understand how to stack and order coverage to be placed.  This may require engagement from the carriers on how much they may consider given the offer provided and any limitations they may have.  Again, this is an involved and iterative process that is best left for experts.

So what should we tell the clients and their advisor when they want to bring multiple producers into the application process?

  • Competition is good.  However, competition to achieve the best possible results should begin and end with the producer selection process—prior to any applications being submitted.
  • Simultaneously submitting applications through multiple sources often has a deleterious effect and results in inferior offers, greater premiums and ultimately lower client value.
  • In large total line case submissions, the ability to control the application process is critical.  One production source must be in charge to manage the entire application and underwriting process.  This is required to negotiate the most favorable offers, maximize available coverage, and prevent carrier uncertainty about total line to be placed.
  • The critical decision point is to pick a production source partner that has the skill, ability and proven track record to drive the best results for you.

Accelerated Underwriting Into the Future

-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.




Charitable Life Insurance Redefined

– by DuWayne Kilbo

Of all the progressive things the life industry has done in the past few years to advance underwriting standards and make it easier to do business, one area significantly lagging is charitable life underwriting.

In charitable situations, the maximum amount of coverage available across almost every carrier in the industry is based upon a multiplication factor—typically 10—of one’s past annual giving to a charity. So if an applicant on average has given $10,000 annually to a particular charity and desires to leverage this giving by allowing the charity to own life insurance on his life, he would qualify for a maximum $100,000 of death benefit.


Seriously…. $100,000?!?!

This hardly seems worth the time and effort required for you and your client to complete an application and go through the underwriting process.

In fact, I’m not even sure how the 10 times underwriting parameter was developed.  When quizzed, carriers are unable to articulate a good response other than to say this is the rule their underwriters have always used.

Bottom line, significant charitable life opportunities exist, but the industry is being held back by an underwriting practice that is old, outdated and needs to be revised.

Let’s consider an example of a client age 50 plus who has worked hard during her lifetime to amass a sizeable net worth, but who either doesn’t exceed the threshold for federal estate taxation, or who modestly exceeds the threshold but doesn’t want to spend the time and money required for estate planning.

The client, however, is charitably inclined and sees value in providing money for causes she believes are worthwhile. She would like to give money on a tax-deductible basis to a qualified charity to purchase life insurance on her life. She may have donated to this charity in the past, and perhaps served in some role for the charitable organization.

So why do we need to stick to an outdated 10 times rule and why can’t some portion of an individual’s net worth be used to qualify for charitable coverage—such as 50% of net worth? For example, if a person has a net worth of $10 million and has available insurability, why can’t he do $5 million of charitably owned coverage?

I asked some carriers about this example and these suggestions.

While a few responses came back as expected to the outdated 10 times rule, there were some progressive carriers willing to take into account a person’s net worth and consider a larger amount.

Of course, the devil is always in the details.  Though several carriers agreed that there could be more flexibility in charitable underwriting, they didn’t want to make a blanket statement concerning such situations.  Using a portion of net worth as a guideline would be considered on a case by case basis.  All considered 50% of net worth too high, and flexibility would be easier to come by if the person had at least some past charitable involvement or giving. The key point is that they were open to discussing and creating a workable solution for a particular case at hand.

This was inspiring!  I realized that it is possible to do something more substantial for charitable giving than was previously the case.

A key step is to discuss and work with carriers on a case by case basis as these situations arise—and well before an application is submitted.

I believe we will develop more favorable charitable underwriting standards as we continue to work with carriers and they become comfortable with newer, more thoughtful and creative charitable underwriting concepts.

It’s only a matter of time.

If you have clients who would like to explore the potential for leveraging life insurance in gifts to their favorite charities, give us a call at Windsor.  We’ll be glad to help!



Insuring the Uninsurable

A New Program Offers Life Insurance for Declined Cases

– By DuWayne Kilbo


It always seems to happen.  You have a client—probably one of your best clients — who desperately needs to buy life insurance to cover a loan or a business buy-sell and is willing to pay the price for whatever they can get.  You’ve sealed the deal — but because of health problems or other issues you are unable to deliver an offer from any carrier—at any price.

It’s a conundrum for the ages, but now there is a solution.

Windsor recently developed a relationship with a creative A.M. Best “A” rated domestic carrier to tackle this very problem.

While it turns our collective underwriting thought process on its head, this insurer is looking for cases that have been declinedYES, DECLINED–by all other carriers in the industry, with the ultimate goal of issuing life insurance policies on these uninsurable risks.

Here are some recent examples of offers made to individuals who were declined by other carriers —



Though the above health profiles are cause for serious concern, our carrier is looking for applicants with at least 5 years of life expectancy with stability of impairment.  This may also include cases of stable HIV, kidney disease, alcohol/drug use and a variety of other impairments

In addition, significant nonmedical issues such as driving and foreign travel (but not to war zones) may be considered.

Out-of-program examples—due to their volatility—include conditions such as AIDS, ALS, dementia more than a mild cognitive impairment, COPD on oxygen, and a body mass index greater than 60.

Here are some product details to keep in mind:

  • Plans of coverage available:
  • 5 year term, issuable from ages 20 to 70
  • 10 year term, issuable from ages 20 to 60
  • Both plans are nonconvertible and nonrenewable, and issued on an age-nearest basis
  • Face amounts offered – $250,000 to $4,000,000
  • Coverage is available in all states except New York, Vermont, Alabama and Mississippi

Because of the high risk nature of the impairments being insured, the rating classes are loaded a bit more than what you may find on other similarly rated domestic products.

If you have a client who needs and wants coverage and has been declined by every carrier in the industry, call me now (800.410.9890 –  This is a program you’ll want to discuss.  It could save you a case, and make you a hero to a valuable client.

New Jumbo and Super Jumbo Paradigm

— By DuWayne Kilbo

Jumbo cases can be challenging.  Defined by many carriers as total line of coverage applied for including coverage in force exceeding $65 million, this is especially true for super jumbo applications that involve total lines in excess of $100 million, and where health conditions or applicant age become factors.



Every application is unique and individual case facts make the task of putting jumbo and super jumbo cases together anywhere from reasonably challenging to downright impossible. However, with premiums from five figures  to several million, we need to approach these situations with working knowledge of all available resources—including those of direct carriers and reinsurers.

As with many clients, and especially with large cases, an insured’s health condition may suggest an informal shopping effort to gauge carrier appetite for a particular medical impairment.  But even then, deciding which carriers to shop depends upon product selection, pricing and carrier niches.

The ability and reputation of a brokerage agency to put together any type of case is important, but this becomes critical in the large case market where just pennies more per thousand of coverage can make or break a case.

Carriers expect a certain level of informal case shopping, especially in the large case market.  However, they approach these situations with expectations that they will ultimately win a fair share of business they see.  When they perceive cases being shopped needlessly, where time, energy and resources are burned up reviewing cases they have no chance of putting on the books, the long term effect is often inferior underwriting effort and offers.

So other than to populate a spreadsheet—which often isn’t a good enough reason—it’s neither efficient nor effective to shop carriers that have no reasonable chance of winning a case.

Another problem arises if formal applications are submitted to multiple carriers, because carriers and reinsurers consider the total face amount of ALL applications in the marketplace, even if a lesser amount is intended to be placed. The ultimate impact may be further restriction on available large case capacity, even from carriers targeted to provide the best available rates and terms for the situation at hand.

But all of that isn’t new.

What is new is the use of facultative reinsurance—where reinsurers review direct carrier papers—to provide additional capacity on jumbo and super jumbo cases.

In the past, a typical large case shopping plan would avoid facultative reinsurance at all costs, since conventional wisdom was that “reinsurance will screw up my case.”  And in certain situations there was some truth to this statement. This caused brokerage underwriters to shop multiple carriers in order to stay within retention or automatic binding limits. Depending upon the total line to be placed, this approach typically took much more time and effort and quite possibly resulted in inferior rates and terms due to carrier product and price differences.

At Windsor we have discovered that reinsurers have newly developed a much greater appetite for risk and have become more willing to negotiate.  Why?  Because carriers are retaining more mortality which in turn has meant fewer reinsurance cessions—one of the primary means by which reinsurers make money.

We have found, especially in jumbo cases, reinsurers take a “reasonable man” approach and make an effort to match direct carrier offers, and in several situations have actually improved upon direct carrier offers.  However, as indicated already, the reinsurers earn money primarily from mortality and are paid by direct carriers on a yearly renewable term basis for ceded business or coverage accepted facultatively. Unlike direct carriers, they don’t make money on large first year or short pay premium solves, or investment spread and fees. In view of this, they won’t take unnecessary risk.

In addition to this, we have found “hidden” capacity available from a couple of reinsurers in the market.  The reinsurance market is very concentrated so it isn’t difficult to determine who these reinsurers are. However, this capacity is only available via select direct carriers — in our case, Lincoln Financial and Prudential. The reinsurers in question have rewarded these select carriers with capacity approaching $100 million or more in certain situations for both permanent and term plans of coverage, while providing significantly less capacity to other carriers who may use them. And along with internal direct retention and capacity available via other reinsurers, these same direct carriers can often put together cases on their own paper in the $150 million neighborhood.  This is an absolute winner for everyone involved—client, producer, BGA, carrier and reinsurer–if these carriers provide the best available rates and terms.

In another recent example of large-case-forward-thinking, Prudential has put together a $100 million jumbo limit along with a very substantial automatic limit of $75 million.  This increased capacity comes with restrictions, but is something to keep in mind when considering large case submission and positioning.

In summary, putting together the jumbo and super jumbo case takes considerable planning and insight. If done right, taking advantage of special hidden direct carrier reinsurance capacity and improved automatic and jumbo limits, the effort required is minimized and the ability to achieve the best results for everyone involved is significantly enhanced.