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Medical Underwriting for the Affluent Client

May 31, 2017

Life insurance medical underwriting is a carrier’s assessment of mortality risk associated with an individual’s medical history and the pricing associated with the assessment. Underwriting guidelines differ among insurance companies. It is not unusual to receive inconsistent offers from the carriers – i.e. Preferred, Standard, etc. – even though they all reviewed the same medical history.  Some companies may specialize in or have more experience with certain medical conditions than others – e.g. Parkinson’s, diabetes, sleep apnea, HIV, hypertension, etc.

There are many misconceptions about life insurance medical underwriting. Often people believe they are too old or have too many adverse health conditions for them to obtain new coverage. New coverage is regularly obtained for those in their 70’s and 80’s. Their underwriting classification is determined based on their health compared to others of the same age and gender, not to those 20 or 30 years younger. Some individuals with certain heart conditions (e.g. stents, bypass, open heart surgery) and cancers (e.g. breast, skin, prostate) have been able to obtain attractively priced new coverage.

Additionally, affluent individuals exhibit more favorable mortality characteristics than the general public, and some insurance companies take these characteristics into account during the underwriting process. There is hard data proving that affluent individuals take better care of their health and live longer than the general public. Certain companies have separate risk pools for affluent individuals to take advantage of these favorable characteristics both in medical underwriting and in product designs.

It is important for an individual to be represented by one source (preferably an advisory firm) to successfully manage the life insurance medical underwriting process. Otherwise, the carriers get confused as to the representation and can become overly cautious with their offers. The source/firm should understand an individual’s health conditions and have experience with multiple companies and underwriters to receive the most favorable underwriting result. Underwriting classifications can be obtained prior to a physical exam via a confidential and preliminary process to assist in making informed decisions about coverage with accurate information. Sometimes, companies will improve their underwriting classification for an individual after negotiation and prior to the placement of coverage. The source/advisory firm should have experience with this negotiation process and a strong track record in obtaining favorable results. A life insurance advisory firm with an open architecture model, deep working relationships with a variety of insurance companies, and a managed approach to underwriting should be engaged to provide the most effective representation for clients.