Medical Underwriting: The Times They Are A-Changin’

It is a long way from Bob Dylan’s realistic prophecy of what was happening and what was to come back in 1964 when he wrote the song. No one can disagree with the state of the world protests and the COVID pandemic that the times certainly are a-changin’. This is also the phenomenon happening in underwriting and risk selection, and we have to be prepared to meet the changes to insure a positive outcome no matter our underlying feeling about what those changes are.

While I can’t take my experience in underwriting back to the 60s, I can to the 1980s—where the role of the medical director and underwriters as a whole was taking big progressive steps. The relationship of brokers, agents and insurance underwriters was an interactive one, where give and take helped to build a common ground. Where back and forth for a mutual benefit was not avoided but actually welcomed. The more information on an individual case a doctor and underwriter could gather, the higher the comfort in taking a risk became. Each individual case stood out on its own idiosyncrasies, and every diabetic, rheumatology case, or even mental health issue was judged on an individual basis. Additional information such as lifestyle, social connection and self-care was weighed into an individual situation to make the most positive offer. Producers often were very involved with their clients, and knew so much more under the surface of the application that made for an individual client presentation. Everyone’s handprints could be seen on the application and a collaborative effort was made to do the best for each client.

Medical directors were often involved in more ways than just being a walking textbook for underwriters. They analyzed each case, looking for positives and negatives. They asked questions, even spoke to individual health care providers at times. Most physician medical directors came out of extensive practice situations, so they were able to judge clinical aspects more astutely and read into the nuances of what an Attending Physician Statement said. I could look at my notes from 10 or 15 years previously and know how I felt about a patient’s level of self-care, prognosis, and long term outcome of any particular problem. They were “must reads” for any of us looking for the favorable aspects of approving a case.

Most importantly, the interactions were collaborative. Underwriting manuals give a good idea of combined experience of potential insureds with a combined average of outcomes. Individual underwriting defined a general prediction into an individual assessment. Insurance companies wanted to provide the best offer to as many people as they could, and really only separate the outcomes that would be catastrophic and take them out of the equation. It was not unusual for broker, agent and underwriter/medical director to go back and forth with each other looking for what materials could be added that would provide a more favorable situation for the client. While not waxing poetic for “the good old days,” the situations have changed and we all need to know what to expect in today’s climate.

Much more underwriting is done on a total mortality of insured lives basis. A much larger database is available to companies now to do predictive underwriting. Impaired risk underwriting is being left behind, for more preferred type result cases where a series of algorithms is calculated on personal data and a more predictable set of outcomes. Many companies have impaired retention limits where those who are not in excellent health are basically excluded before the process starts.

Facility of application is becoming the buzzword of application. The relationship oriented business is being left behind for the client-friendly online submission that may take 10 minutes of an individual’s time. Hubs where a client can submit a general application and have it immediately shopped out to ten different companies, particularly for term insurance, are becoming the norm. The playing field shifts from medical underwriting to pricing, and companies who were more client intensive may be left at the starting gate in the eternal search for the lowest price. It is the “Amazonization” of purchasing insurance, and it appears likely to be the new standard going forward.

Medical colleagues of mine to whom underwriting was as much an art as a science are being replaced with physicians (and even non-physicians) who have backgrounds in epidemiology, predictive health and genetics. An insurance policy in the future may be judged as much on zip code of residence, credit history, profession and even facial recognition technology as any medical or social data. Blood samples now can be tested for anything, even genetic tendencies toward any number of possible diseases and testing and analysis that isn’t part of any personal physician’s database. Insureds will sign consents online and truly not know what data they are providing to an insurer and, through the application process, as well to the future database of insurance predictive analysis.

Where this “progress” takes us is unknown at present. Change isn’t always progress, and not all change ends up as a positive outcome. Certain things seem more likely than others based on experience to date. Impaired risk underwriting is dying, or at least being minimized. Price is superseding relationship in the application process. Insureds are being asked to make decisions on product and need more and more based on their own research and without the experience of a professional. Price has risen to the forefront of the application process as well as ease of application. Many Attending Physician Statements are being farmed out to medical personnel in foreign countries to translate and summarize for underwriters without the benefit of understanding of what underlies a doctor’s notes, terminology and expression. The industry runs the risk of people (and legislators) deciding too much personal data is being given and shared and the whole process may be shaved back to using a minimum amount of medical information in order to make an insurance decision.

Once a very relationship oriented business, the immediate future of underwriting and even of insurance in general appears headed to treating the product and the whole application process as a simple commodity, as available online as it is through a professional. It’s clear that the personnel and decision makers of insurers are headed in that direction. It’s being done at the expense of a personal experience and benefit of individuality and the expertise involved with it. It may be that it is the way of the new world. But it may end up, in the words of another 60’s icon, Joni Mitchell: “Don’t it always seem to go, that you don’t know what you’ve got till it’s gone.” Here’s hoping that both the art and the science of underwriting is never lost.

MD, FACE, FLMI, board certified internist and endocrinologist, is medical director for SBLI of Massachusetts. He has extensive brokerage and life insurance experience over 30 years with Pacific Life, MetLife Brokerage and Transamerica Occidental Life.

Goldstone is board certified in insurance medicine and the inaugural recipient of the W. John Elder Award for Insurance Medicine Journalism Excellence. He was also honored as a fellow of the prestigious American College of Endocrinology and has written monthly for Broker World since 1991.

Goldstone can be reached by ­telephone at 949-943-2310. Emaill: drbobgoldstone@yahoo.com.