To speed up underwriting for life insurance, more insurers have adopted an accelerated underwriting process.One of the major reasons people hesitate to buy life insurance is the prospect of undergoing a lengthy and invasive health assessment. Other individuals are simply reluctant to answer personal questions regarding their lifestyle. Such factors contribute to what can be a time-consuming and sometimes frustrating procedure that discourages many potential candidates.
In an effort to speed up the life insurance underwriting process, many insurers have shifted away from traditional underwriting practices to an accelerated underwriting model for select individuals. Under accelerating underwriting, an applicant bypasses a number of hurdles normally required by traditional life insurance underwriting, including a physical examination and a written statement from a physician. Instead, applicants complete a phone interview during which they answer basic health questions.
When evaluating an applicant for a life insurance policy, insurers also review the person’s medical, financial, and driving history. Somebody with a bad driving record or a previous bankruptcy, for example, may be deemed a poor risk. All of this information can be accessed digitally today, which only quickens the underwriting process. More importantly, however, accelerated underwriting eliminates the need for a comprehensive evaluation of the applicant’s health, shortening the time frame for purchasing a life policy from months to weeks.
What Accelerating Underwriting Is Not
Accelerated underwriting should not be confused with guaranteed issue life insurance or simplified issue life insurance, which either disregards an applicant’s health history altogether or doesn’t require a medical exam. In those instances, the policyholder pays a higher premium to expedite the underwriting process. Accelerated underwriting, as its name implies, simply trims the underwriting timeline without affecting the premium or other provisions in a term life policy such as level premiums. In addition, underwriters still analyze an applicant’s information to pinpoint those at lowest risk of death or disability.
As Samantha Chow, Senior Life Insurance and Annuity Analyst at Aite Group, points out in Investment News, accelerated underwriting enables insurers to provide more individualized pricing, helping them lower rates for some consumers. It’s among the many reasons behind the system’s adoption throughout the industry in recent years. According to a Milliman, Inc. report on term life insurance, 17 of the 40 insurers surveyed had already implemented accelerated underwriting practices, while another 16 had contemplated doing the same.
Not for Everyone
For various reasons, not all applicants meet the guidelines for accelerated underwriting. Anyone with risky health conditions such as diabetes or hypertension, for example, should not apply for it. If those factors or other risks are detected during the review period, the insurer may ask the applicant to go through a traditional underwriting process that includes a medical exam. An insurer may also ask a randomly selected accelerated underwriting candidate to undergo a more extensive underwriting review if it suspects that they might present a greater risk.
If approved under accelerated underwriting, applicants can expect a maximum death benefit of $1 million. People looking for a higher benefit will likely have to submit to a full medical exam.Nevertheless, certain individuals — non-smokers in their 50s, for example — are perfectly suited to accelerated underwriting. Insurance agents can interview their clients to determine whether they’d make good candidates for this streamlined process. Agents must also research the different accelerated underwriting standards of each insurer to find the one best suited to their client’s circumstances. Given the vital protection that life insurance provides to their clients and their families, agents shouldn’t overlook the benefits offered by accelerated life underwriting.