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Ray Dinstel

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Ray Dinstel is the vice president of Pacific Life’s Broad Market (Lynchburg) Operations. In this capacity he is responsible for strategy, product, new business, customer service, and underwriting for Pacific Life’s efforts to expand its life insurance protection business to the middle market. He has been in the insurance industry for over 40 years, most of that time in the underwriting field. Dinstel believes in continuing education as demonstrated by his BS and MA from Baylor University and 14 insurance designations which include FALU, FLMI, CLU, and CPCU. Outside of work he has a passion for finding a cure for Alzheimer’s and served on the Alzheimer’s Association Board of the Central and Western Virginia Chapter for nine years, two of which he served as chairman. Currently, Ray serves as chair of the American Heart Association’s 2019 Lynchburg Heart Walk and is a member of the board for Amazement Square, a non-profit children’s development center. Dinstel is located in Lynchburg, VA, and can be reached via telephone at 949-420-7529. Email: Ray.Dinstel@PacificLife.com.

Pitching A Perfect Game Of Underwriting

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Strategy, good stats, and the instincts of an
ace pitcher are a winning combo.

I love baseball. Even when using the best statistics, the unexpected—triple plays, stolen bases and home runs that save the day—keeps us in our seats from spring through early October. In underwriting, leaders also rely on statistics and try to cover all of our bases by ordering the right tests so we can pitch the perfect offer. Yet, we still deal with the surprise plays and the occasion foul ball.

Like baseball, underwriting has a history that shaped how we play the game today. For example, it may seem sacrosanct that blood testing be part of obtaining life insurance. However, old timers will remember that, prior to the mid-80s, the use of labs was relatively rare—saved mainly for very large cases.

The Acquired Immune Deficiency Syndrome (AIDS) crisis changed the game with very low life expectancies for those diagnosed with the disease. By the late 80s lab testing was the norm, and to counter the cost of this testing carriers began to find additional uses for lab results beyond Human Immunodeficiency Virus (HIV) detection. As the result of lab testing, insurers had insight into important aspects of an individual’s life expectancy—the risk of diabetes, heart disease, alcoholism and many others.

With this knowledge insurers began to segment risk into multiple preferred categories, going far beyond simply smoker and nonsmoker. The importance of the underwriting function skyrocketed. In baseball terms, underwriters are now the pitchers—the very heart of the life insurance game.

Like all good pitchers, a good underwriting leader keeps an eye on all the bases and is always working on new and better ways to pitch the best offers. Innovation is what keeps an ace pitcher on the mound.

Much has changed since the 80s and underwriting must adapt to the new world of data analytics and, most of all, the hesitation of many potential buyers to accept the inconvenience and pain of blood draws.

At present underwriting leaders wishing to stay in the game have two alternatives—to seek substitutes for fluids, or find ways of obtaining the results of fluids from other sources.

Around 2014, underwriters began experimenting with substitutes for fluids through accelerated underwriting (AU) programs—combinations of predictive models, better designed applications, and tele-underwriting. Success of these models was based on the ever-increasing ability to uncover important data on applicants beyond the traditional Rx, Medical Information Bureau (MIB), and Motor Vehicle Report (MVR) databases.

This “new” data included credit and clinical lab data, criminal records, and electronic inspection reports. For now most companies using substitutes for fluids have seen a relatively low percentage of instant offers, rather they use their programs more as triage for applicants to move to approval or more likely full underwriting. This variability in outcome can lead to customer dissatisfaction. In addition, most of these programs are limited to young age applicants in the standard or better classes. There are significant positives to these programs as they offer the potential of much faster and convenient service over traditional underwriting.

For obtaining fluids from an alternate source the key is the Attending Physician Statement (APS). Like those using predictive analytics, underwriters using alternative methods of fluid procurement use the traditional data such as Rx, MIB, and tele-underwriting. Added to these sources is an APS containing up to date medical information from the applicant’s personal physician along with the results of blood testing conducted.

Unlike AU, underwriters using alternative means of obtaining fluids can offer guaranteed access to their fluidless program as long as the conditions set forth are met—usually the ability to obtain medical records indicating doctor visits with blood work within specified time periods. As an added benefit, the producer can obtain traditional justification for negative actions taken by the carrier.

The disadvantage of these programs is the time it takes to obtain medical records. While the fluid substitution method is fast and painless, it is unpredictable. The alternate method of obtaining fluid can be slower but is very predictable. With the coming reality of electronic health records it is anticipated that both methods will merge, presenting the opportunity to obtain life insurance at competitive rates with little hassle.

Today’s consumer demands a faster pace, so much so that major league baseball is researching ways to speed up the game to suit shorter attention spans. Underwriters must also adjust our game to the new reality that a growing number of potential buyers will not endure the pain or inconvenience of exams and labs.

To stay on the mound, underwriting pitchers must adapt to these changes. But one must be cautious when innovating because some prefer the past. Innovation must be conducted with the appropriate research and preparation so that your underwriting teams can more easily adapt to change.

There will always be a place for traditional underwriting, but to meet the needs of a growing uninsured population alternatives to fluids must be found so we can serve up faster pitches—not with the intent of striking out the consumer, but by helping them find the sweet spot as they take a swing at financial security for their families and businesses.

This article is intended for Financial Professional Use Only. If you are not a Financial Professional, please visit our public website at www.PacificLife.com.

Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. Insurance products and their guarantees, including optional benefits and any crediting rates, are backed by the financial strength and claims-paying ability of the issuing insurance company. Look to the strength of the life insurance company with regard to such guarantees as these guarantees are not backed by the broker-dealer, insurance agency, or their affiliates from which products are purchased. Neither these entities nor their representatives make any representation or assurance regarding the claims-paying ability of the life insurance company.

Life insurance is subject to underwriting and approval of the application and will incur monthly policy charges.

Broker World is not affiliated with Pacific Life.

This article is distributed through Pacific Life, Lynchburg, VA (844) 276-5759.

Pacific Life’s home office is located in Newport Beach, CA.

Underwriting Life And LTC Insurance: The Six Differences You Need To Know

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We hear a lot about the life insurance gap—according to LIMRA, 30 percent of Americans state they need more life insurance. Perhaps more important than the life insurance gap is the immense need for long term care insurance (LTCI).  According to the Centers for Medicare and Medicaid Services, at least 70 percent of people over age 65 will need long term care services and support at some point in their lives.1 Yet less than five percent of Americans have any kind of long term care insurance at all.2

And this care will be expensive.  According to the Genworth 2015 Cost of Care Survey,3 the national median annual cost of nursing home care in 2015 was $91,250, ranging from $51,100 for a semi-private room in Texas to an incredible $281,415 for a private room in Alaska.  Even homemaker’s services had a median annual cost of $44,616.

Based on these numbers, the greatest opportunity for brokers only selling life insurance would appear to be an aggressive move into the LTCI space; however, many brokers don’t know how to field underwrite LTCI. So let’s take a look at some of the big differences between quoting and underwriting life insurance and LTCI and, in the process, take some the scariness out of quoting LTCI.  

The BIG Differences

1. Mortality and morbidity
Without question, life insurance underwriting has more moving parts than LTCI underwriting—financial, avocation and occupational expertise are required to be a successful field underwriter of life insurance, and then you need to master all those rate classes and flat extras. The saving grace is that mortality is all you have to deal with on the life insurance side.  

However, when it comes to LTCI, mortality and morbidity both come into play, complicating LTCI underwriting. It is increasingly evident that mortality plays a bigger part in the underwriting of LTCI than previously thought.  While better than expected mortality results (fewer people dying) are almost always better for life insurers, that is generally not so for LTCI. The simple fact is that those who live long enough are more likely to become disabled and need long term care services.

2. Cognitive impairment
From a mortality perspective, cognitive impairment is the number six cause of death in the United States, behind cancer and cardiovascular disease.  However, in terms of dollars, cognitive impairments are far and away the number one cause of concern in LTCI.  At Genworth, close to 40 percent of all claims dollars are related to cognitive claims. Thorough screening of potential LTCI applicants for cognitive impairment is critical.  You should be cautious when an applicant relates memory concerns or mentions the need for help with simple everyday tasks such as balancing a checkbook or taking medications. Many long term care companies are now screening for early cognitive impairment at ages as low as 60, so prepare your clients for the screening, making sure they understand the need to take the testing seriously.  For best results, cognitive screening should be conducted in a quiet, private location. Applicants need to pay attention and carefully follow the instructions.

3. Cardiovascular disease
Cardiovascular disease is more important in the life insurance world and is generally more leniently underwritten by LTCI carriers. The exception being cerebrovascular accidents, also known as strokes.  Strokes are a significant cause of life insurance and LTCI claims and are usually treated conservatively by both life insurance and LTCI underwriters. Outside of a history of a stroke, don’t hesitate to send your clients with other cardiovascular impairments to your long term care carrier after around six months—as long as the applicant is stable without complications and there are no other significant impairments present.  In life insurance these disorders would likely not be standard for many years if ever.

4. Cancer
LTCI carriers tend to be more aggressive than life carriers on cancer history because cancer often leads to early mortality rather than extended periods of long term care. On the LTCI side low and even medium stage cancers are usually underwritten at standard rates as early as six months after treatment, while life underwriters would not consider standard for several years after treatment. Here, the key is staging and any recurrence of the cancer.  

5. Musculoskeletal disorders
Musculoskeletal disorders are impairments involving joints, muscles and bones.  With the exception of the presence of a waiver of premium rider or the continued use of narcotic drugs, life insurance carriers are typically aggressive on these disorders as the mortality risk is low.  

LTCI carriers, on the other hand, are concerned with chronic neck, back, spine and other such disorders as these can lead to functional limitations over time. When field underwriting these disorders, you should pay careful attention to medications and physical limitations.  

The use of narcotics for pain control is a warning flag, so, to avoid a decline, any such history should be fully developed before an LTCI application is submitted. Question the applicant carefully to determine if the underlying impairment is impacting job performance or other daily activities.  Observe any physical limitation that might be present. Does the applicant have a normal walking gait? Can he or she easily rise from a chair? Are there signs of an active lifestyle?   

Other signs of concern here are a history of falls and obesity. Falls can be a sign of imbalance as well as limited mobility. Obesity puts stress on already impaired joints, so screen carefully for a history of joint and other musculoskeletal concerns with an applicant nearing the maximum build guidelines.  And always question the applicant carefully on build, as it is a major cause of declination and is often inaccurately reported.  If the given build does not match your observation, politely re-ask the question.

6. Requirements and rate class structure
When selecting an LTCI carrier you will not only have to screen based on the likelihood of acceptance, but also select the carrier with the best rate class structure for the applicant and determine the willingness of the applicant to complete medical requirements.  While most life carriers have the same basic requirements, long term care carriers vary greatly as to the need for a paramedical exam and labs.     

The number of rate classes available varies with each carrier and it is sometimes difficult to compare rate classes across companies.  The use of a carrier’s field guide is encouraged when selecting a rate class as most guides have clearly laid out matrixes of what it takes to obtain each class.  In general, classes are based on criteria such as nicotine use, blood pressure, build or body mass index (BMI), and impairments present.  Some companies have taken criteria further to include family history and cholesterol.  

In an effort to provide rate class determination support, Genworth has made eValuate, its field underwriting tool, available to brokers. By entering the applicant’s medical history into eValuate, a quick estimate of expected rate class can be obtained.       

With the strong likelihood that people over age 65 will require long term care services during their lifetimes, there is an immense need for long term care insurance given the aging demographics of the United States.  Current life producers can tap into this important market by working closely with their selected carrier to master underwriting field guides to better understand how to screen and quote correctly. 

Footnotes:
1. 2015 Medicare & You, National Medicare Handbook, Centers for Medicare and Medicaid Services, Revised September 2014.
2. Robert Wood Johnson Foundation, Policy Snapshot, Health Issue Brief, February 2015
3. Genworth 2015 Cost of Care Study, April 2015

When Underwriting Drives New Opportunities

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Life insurance has been sold on this continent since the early 1700s. But even today, a huge swath of Americans remains uninsured or woefully underinsured. Nearly 60 percent of middle market households lack individual life insurance, according to a 2009 LIMRA study (Is There Magic in the Middle Market?). Yet the need for life insurance has never been greater. American consumers, faced with a slow economic recovery, are encountering significant financial security challenges.

Carriers, distributors and producers must work together to find ways to make it easier to sell to and serve this market. We have a tremendous opportunity to bring high quality, affordable life insurance to this market and to help these Americans secure what they value most.

So how does a carrier help make distributors’ and producers’ jobs easier in addressing this need? Beyond product, carriers are presenting a new value proposition when it comes to service—including underwriting and application simplicity and ease—that opens up new markets for distributors and producers and enhances their productivity and efficiency. This makes it more profitable for them to serve middle-market and emerging-affluent consumers.

Bucking Tradition in Underwriting
Across the life insurance industry, underwriting has been performed largely the same way for decades. But the traditional underwriting model presents several challenges to distributors, producers and consumers.

1. It can be a complicated, time-consuming and expensive process. The industry is mired in mountains of paperwork to complete, consumers have to undergo paramedical tests, and excessive ordering of attending physician statements (APSs) costs time and money. Moreover, this process may create confusion and sometimes trepidation in the minds of consumers. So how do we streamline and enhance the process?

2. Ironically, the reams of data collected don’t provide a holistic view of the individual that can be aligned with the real drivers of mortality. For years, underwriting has focused on build; yet today, we know that build alone is not a leading indicator of mortality. In addition, many consumers with common medical conditions such as asthma or depression have been unable to obtain high quality, affordable life insurance. Certain health issues often relegate these consumers to higher tables, which significantly increases premiums. In some cases, consumers cannot obtain life insurance at all. So how do we employ more useful indicators to provide the best outcome for the consumer?

3. The complexity of the process itself often leads to poor communication and inconsistent experiences among carriers, distributors, producers and consumers. Extensive paperwork makes finalizing applications more difficult for producers. Prolonged processing times hinder agents from closing new prospects; during these delays, buyer’s remorse is apt to creep in. Agents can find it hard to explain the vagaries of underwriting to consumers, adding confusion to the process and prolonging it. So how can we improve the sales and buying experience?

Working Toward a New Approach
Fortunately, many carriers have been working to innovate underwriting and the application process—making it easier, quicker and more profitable than ever for producers and simpler and more affordable for clients. How are we doing this?

1. Delivering affordability through a deep understanding of the real drivers of mortality. After collecting and analyzing decades of data, some carriers have developed laser-focused knowledge of the factors most predictive of mortality. From research, we know that when it comes to underwriting, height and weight are no longer paramount, and common pre-existing conditions such as asthma or sleep apnea, if mild and well controlled, in many cases should no longer penalize a consumer who wants to obtain life insurance.

Employing this knowledge—and using the right combination of information gathered through the application; paramedical exams, labs and APSs when needed; and reflexive questioning in client phone interviews—the carrier is positioned to provide better rate classes to applicants, meaning more affordable premiums to the consumer, and to take on smart risk, helping to ensure the long term stability of the business.

2. Speeding the process and cutting costs through a simpler application process. By offering simplified applications and acquiring only essential client information, carriers are streamlining the sales process and improving both cycle times and placement ratios. One such process is simplified intake forms that take only a few minutes to complete with a client. Client phone interviews, leveraging reflexive questioning, can speed the process even further by asking for information relevant to that applicant only. In tandem, these enhancements make the prospect of buying life insurance far more attractive.

3. Enhancing communications to better support the sales process.
While the two other areas of enhancements are far more innovative, sometimes it’s the fundamentals that can make a big difference, and communications falls into this category. By clearly articulating their target market, carriers help producers and distributors better match clients to the carrier, and find it easier to get a “yes” for their prospective clients. Improving written communications to producers and consumers is another area of focus: Being clear about information needs, case status and decisions helps to smooth out and speed up the process.

Final Thoughts
The time is ripe for new approaches to underwriting. By revamping the way underwriting and application processing is done, the life insurance industry can strike a chord that resonates with Americans looking for protection. By focusing on their need to secure what they value most in life and making high quality life insurance more affordable for them, carriers, distributors and producers can not only seize an untapped revenue opportunity, but also play an important role in restoring consumer confidence.