Redefining healthy: Identifying sweet spots in life insurance underwriting
By Anthony Vossenberg
As trusted financial professionals, we need to provide information to our clients to reverse the growing trend of uninsured adults in America. It is time to redefine healthy and throw out the dated misconceptions about pre-existing conditions and insurability.
The number of uninsured adults in the U.S. continues to rise, recently surpassing 118 million, according to Genworth’s 2012 LifeJacketSM survey. The same research shows that many people, especially those with pre-existing health conditions, are taking themselves out of the market for life insurance — some without even applying for coverage. Unfortunately, those living with relatively common conditions such as anxiety, asthma and depression often see their ailments as a barrier to affordable life insurance.
This is a problem that agents and advisors struggle to deal with: How can they convince potential insureds with pre-existing conditions that fair and affordable options exist? With recent medical advances and increasingly sophisticated underwriting practices, the word “healthy” has taken on a new meaning in the life insurance industry, but many consumers have yet to get the message.
Financial professionals need to take this opportunity to help clients better understand that well-controlled health conditions do not need to be a barrier to closing America’s growing gap in coverage.
Understanding the consumer mindset
Genworth’s 2012 LifeJacket survey looked into how many people with a number of commonly diagnosed conditions have no life insurance. These conditions include: anxiety, asthma, depression, high cholesterol, hypertension, weight problems and sleep apnea. The research found that a sizeable portion of respondents with each of these self-reported ailments is uninsured, despite the fact that people with well-managed, pre-existing conditions can often get preferred rates on life insurance.
Unfortunately, insurability is a mental obstacle for many consumers. But there is a large population of American adults that could become life insurance buyers if they were better educated on the underwriting process. Uncomplicating the process
Individuals with perceived insurability issues often see the process of applying and buying life insurance as more trouble than it is worth — another visit to the physician’s office, additional tests and completing a long list of medical questions. They also assume they will have to pay higher premiums, adding another obstacle that agents and advisors must help consumers overcome to convert them to policyholders.
Consumers do not always understand how the application process works, so it is important that agents explain that one basic paramedical exam that can take place at a client’s home, place of employment or patient service center will provide the information needed to compare underwriting class ratings and premiums from a number of carriers. After all, carriers do not assess all risks the same way, and you want to find your client the best solution.
Introduce online tools
Online tools are another great way to help simplify the life insurance buying process and demonstrate how a little can go a long way. With the help of a budget calculator, an agent can personalize the process and customize it to a client’s specific life insurance needs.
While the overall cost of life insurance may seem overwhelming, the calculator can help a client visualize the common, often unthought-of places where saving a few dollars a month could add up to a more secure future. For instance, buying one less coffee a week could potentially buy thousands of dollars in life insurance.
Break down the ratings
Carrier underwriting class ratings are another area that can often be confusing for clients, so savvy agents and advisors will communicate the differences. A preferred best rating at one company can actually carry higher premiums than a preferred rating from another carrier. Producers need to be able to explain to clients why they should not be overly concerned about ratings themselves, but about the premiums they carry with each individual insurance carrier.
Part of a good financial strategy is gathering enough information to make an intelligent, well-informed decision. As trusted financial professionals, we need to provide that information to our clients to reverse the growing trend of uninsured adults in America. It is time to redefine healthy and throw out the dated misconceptions about pre-existing conditions and insurability.