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Policy Matters

First Quarter 2022

NEWS YOU CAN USE FROM THE EXPERTS AT LLIS

In 2022, the insurance industry is working through some of the wrenches thrown at us because of the pandemic. People looked for insurance in record numbers, but insurance company staffing levels, limited in-person ability paramed exams, and state regulations at different points in time made things tricky. Let’s look where we’ve been and where we’re going.

Staffing Issues

One insurance company has this on their agent-facing website page:

As you may have noticed, we are experiencing delays in processing cases due to high business volume combined with the staffing challenges that you may be seeing in many parts of the current economy. We apologize for the inconvenience and we are taking steps to reallocate existing staff from other areas. Also, every associate is working overtime, and we have new associates who have been hired and are in the process of being trained to help increase our speed and provide the service times that you have come to expect.

Another in their semi-monthly e-newsletter:

We are aware that our Long-Term Care application service levels are not where you expect them to be. With our commitment to providing you the quality of service you have come to expect, we are hiring and training additional case managers to help with the workload to ensure your business is handled properly and as quickly as possible. In addition, due to the recent Omicron COVID-19 variant, our Long-Term Care vendor partners are experiencing delays in time service. Significant staffing shortages at the vendor as well as the providers (particularly in-patient facilities) is causing delays in response time to our requests for medical information. Thank you for your patience and understanding as we work diligently to return to normal time service levels. You can be assured that we are doing everything possible to get your cases issued in a timely manner.

Prognosis

While this will probably still be a challenge through the first quarters of 2022, hopefully the bottlenecks clear during the year and then going forward companies are well-staffed and well-trained on new systems (like Accelerated Underwriting, e-applications, e-policy delivery) to maintain the right balance of staff for future applications. It’s not anything different than we’re hearing in many other industries.

Accelerated Underwriting

Like all technology advancements, they’re great when they work, but throw us all into a tizzy when they don’t. Until just a few years ago, every insurance application required a paramedic exam, whether it was $100,000 or $10,000,000. And -- more often than not -- the insurance company ordered the application’s primary care records and 99.9% of the time (still like this today) ordered the records for any specialists or “ologists.”

Now remember two years ago, when everyone wanted life insurance, no one wanted anyone coming into their house, and certain states even stopped examiners going out for a while. Insurance companies designed Accelerated Underwriting (AU) programs where some people may go through faster (no exam, maybe no medical records). All of these AU programs generally require some form of the client providing their information directly to be eligible. It can be a responsive e-application that asks follow up questions based on the client’s initial answers. But like all technology, it’s great when it works, but can bring things to a screeching halt when it doesn’t.

Prognosis

This one is here to stay. In the near term I hope to see:

  1. More insurance company e-interviews instead of phone calls, so time of day/scheduling calls isn’t an issue
  2. Higher limits: Many insurance companies limit the AU face amounts to $1M so higher limits only mean more clients are eligible, which is a good thing

Automated Underwriting

Some insurance companies are taking the Accelerated Underwriting one step further and trying to eliminate a human underwriter interaction and making offers to insure applicants essentially “instantly.” This can work well when the client says “yes” where we want a “yes” answer and “no” where we want a “no” and is approved at the Super Preferred rate class. But lots of us have a “yes” in the “no” column so when they go into the automated chute, we lose an underwriter’s trained eye on the more subjective nuances that are each person. Two applicants may be taking the same medication, but have different circumstances, control. Do the automated algorithms assign the same rate class? Or is there enough detail to offer one a better rate than the other like a human may?

No matter how many inputs we have, a computer can’t take the subtleties into account so sometimes the automated approvals aren’t as good as we’d hoped and we may need to do additional work; maybe even applying to a different insurance company.

Prognosis

Imagine that starting tomorrow you have two new options on your drive home:

  1. A new route cuts your drivetime by 15%-20% consistently, or
  2. Another route that might save you 50% some of the time, but it has a lot of construction, so sometimes you have to go around and it makes your commute even longer than it is today

Personally, I’d opt for #1. So instead of maybe trying for 50% of all applications to go through automated (and knowing some of those need to be reworked or even get refused and the client applies elsewhere), I’d hope that insurance companies shoot for a lower number like 10%-20%, but on very clear applications:

  • Preferred Plus - put it through the Automated chute
  • Applicant’s build 6’0” and 260, so Standard will be the best offer, other little issues, but nothing more significant - Standard offer!
  • Not crystal clear? Send it to a human underwriter to review

New York, New York

Any of you that have clients in NY applying for life insurance know that sometimes the process comes to a screeching halt if they have existing coverage that might be replaced. Regulation 60 (Reg 60) requires a Definition of Replacement form that requires disclosures of the existing policy information before applying for a new policy. A well-intentioned safeguard I’m sure, but creates a slow-down and more paperwork.

The state of NY recently also enacted a Suitability and Best Interest in Life Insurance and Annuity Transactions or “Regulation 187” for short. Like Reg 60, a well-intentioned set of paperwork and disclosures, but once you add a new set of regulations/paperwork, no one knows exactly how much work will be required, the amount of forms to be reviewed until it actually happens, and it seems to be another bottleneck in NY.

We’re finding that -- instead of reviewing the Suitability forms in tandem with the application -- some insurance companies are not sending the 187 suitability forms for review until after the policy underwriting has been completed and approved. One company tells us that their suitability review is taking 15 days.

Prognosis

Like Reg 60, this may be something we have to live with, and we’ll monitor which insurance companies seem to be handling it well and which ones aren’t.


It was great to see so many of you at the Academy in February after only missing one (the last one was February 2020, right before COVID-19 started shutting things down) and I hope 2022 is good for all of us!

Mark Maurer, CFP, CPA
President & CEO
markmaurer@LLIS.com

SOLUTIONS AVAILABLE THROUGH LLIS

Term Life Insurance | Low-Load Universal Life (Individual & Survivorship) | No Lapse Guaranteed Univeral Life (Individual & Survivorship) | Long Term Care Insurance | Disability Insurance | Critical Care Insurance | Low-Load Variable Annuity | Immediate and Fixed Annuities | Low-Load Variable Universal Life | Hybrid Life/LTCi | Hybrid Annuity/LTCi

(We recommend low-load permanent life insurance and annuities when possible)

(Not all policy types available in all states)

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