733 Ft. Worth Drive
Suite 100
Denton TX 76201
Phone: 940-566-0800
Fax: 940-382-0523
www.donboozer.com
DON BOOZER & ASSOCIATES
1-800-543-0886
BEST KEPT
SECRETS
DON BOOZER & ASSOCIATES
1-800-543-0886
FINANCIAL UNDERWRITING
With the decrease in term costs, we are seeing larger policies
being requested. It is not uncommon to receive applications for
$1 Million or $2 Million or more. The fact that the applicant can
afford the premium does not fulfill the financial underwriting requirements.
There has to be a financial justification for the
amount of coverage being requested and most of the time, these
justifications are determined using a multiple of income for personal
coverage. An example of this; A person between the ages
of 46 and 50 can qualify for an amount up to 14 times their annual
income. The financial underwriting guidelines can be found in
your company provided Underwriting Guide
. Always refer to the
guidelines when taking any life insurance application. If there is
any deviation in the amount applied for and the published financial
guidelines, ALWAYS write a letter and attach it to the application
and explain to the underwriter the method used to arrive at
the amount applied for. (See Buck's Law).
Housewives and retired individuals are treated differently than
individuals who work outside the home. Always be aware of this
when taking an application. There has to be a demonstrable
financial loss in order for the underwriter to approve the case.
Failure to follow the financial guidelines can kill a sale faster than
almost anything. In the large case arena, this is the NUMBER
ONE reason for not placing cases. Know the rules and place that
big case.
WHAT ARE THE BINDING LIMITS?
Binding limits vary by company. You will find the limits listed on
the "Conditional Receipt" in your life application. The rules are
very specific and must be followed. Never try to bind a policy for
more than these two limits. If you do, by law, your client will receive
a letter from the underwriter and his check will be returned
to him. This is never a good thing.
I am from the old school, and I believe that a sale is never truly
"made" until the check is picked up. Whenever possible, I get the
check when I take the application - as long it falls within the binding
limits.
When you bind a policy by picking up a check, ALWAYS leave
the conditional receipt with the client.
WHEN CAN AN AGENT BECOME LIABLE FOR THE CLAIM?
This is a very large question with a very long answer. I cannot list
every situation where this might apply, but I can list a few things
that you can do to help prevent it.
1) Always present all of the facts to the prospect.
2) Always keep a copy of every piece of paper that is used in the
transaction in your file in your office. Keep it for a very long time!
3) Always tell the insurance company EVERYTHING you know
about the client and his/her situation. Never assume that any
information that you have is not important.
4) As an agent for the company, any information that you have is
information that you must divulge to the company.
5) As an agent, you represent both the company and the client.
You must fulfill your duties fully to both parties.
6) Never take shortcuts on anything. Always perform above
and beyond what is expected of you.
7) Lawyers get paid on a contingency basis in these types of
cases and they will FIND the mistakes and point them out to
the judge and the jury.
THE BEST KEPT SECRET IN THE UNDERWRITING GAME
The best kept secret is really no secret at all. However, it is
the NUMBER ONE most overlooked piece in the puzzle. Remember
. . . . your client is a bunch of writing on a bunch of
pieces of paper to the underwriter. The underwriter will
NEVER meet your client. He will NEVER get to know him as a
person. The only opinion that he will be able to form of your
client is what he finds on the pieces of paper.
Help him get to know your client, give him ONE MORE piece of
paper! Write a cover letter for each application and tell the
underwriter everything that you know about the case - good
and bad. Tell him how you arrived at the amount and tell him
about the applicant, where he works, about his family. All of
this information can influence the underwriter's decision. Writing
the letter may take an additional 10 minutes, but it may
save WEEKS in the underwriting process!
Over the almost 40 years that I have been practicing my livelihood,
I have had the opportunity to work with some exceptional
underwriters. Many of these underwriters have taken the time
to educate me on the underwriting process and most of what I
am relaying to you today came directly from these great friends
and underwriters. Without exception, their two cardinal rules
are always the same;
Ask and complete EVERY question on the application. Get all
of the information and write it legibly with a black pen. Never
use pencil or any other color of ink. Never leave a space blank
- write in "none" or "does not apply" - but NEVER leave a
space blank.
Always add a cover letter and give me a visual picture of this
person as a human being and not just a number and a pile of
paper.
I believe that the advice contained in this guide will serve you
as well as it has served me - IF you will put it to use. I will
make you a deal. Try these guidelines for 6 months. If our
underwriting results don't improve, I will buy your dinner.
OF
LIFE INSURANCE
UNDERWRITING
MEMBER
National Brokerage Consortium
MEDICAL CONDITIONS THAT ARE DEAL STOPPERS
The list is fairly short. Alzheimer's, recent (or current) cancer,
recent (or current) heart issues (heart attack, progressive heart
disease, pacemaker installation, etc.) There are others, but
these are the most common. If your client has any of these
issues, you should NOT take an application without first getting
a preliminary quote from your Brokerage General Agent (BGA).
MEDICAL CONDITIONS THAT MIGHT STOP THE DEAL
This can be a huge list. Controlled blood pressure, controlled
cholesterol, controlled diabetes, controlled hepatitis - pretty
much CONTROLLED anything. Medical science has made
this an ever changing issue over the past 20 or so years and
the improvements just keep on coming. If your client has these
or any other "controlled" ailments, get a preliminary quote from
your BGA - before you quote the case and before you take an
application.
USE QUESTIONNAIRES TO GET A BETTER RATE
Every life insurance company that is serious about their underwriting
offers a list of questionnaires to help gain information in
the underwriting process. Often, we as agents feel inadequate
when faced with a client who has a health history. We don't
know what questions to ask. The questionnaires give you the
questions to ask. If you will gather the information before the
app is taken, the BGA or the underwriter can usually give you
an accurate quote based on the information gathered.
If your prospect has any of the following issues, help them get
a better (and quicker) decision by using a questionnaire.
Alcohol
History Diabetes Tobacco Usage
Aviation
Driving Violations Depression
Avocation
General Health Issues
Cancer
Heart Disease Drug History
Chest Pain
Stroke
Criminal History
All of these areas can be better explained with the use of a
questionnaire. If you know the issues in advance and have the
answers to the questions, you will be more likely to have a
policy issued that you will be able to place. If a client is a
"Table D" due to diabetes, TELL THEM WHEN YOU QUOTE
THE PRODUCT. In their case, the Table D is the correct rate
for them - it is their "standard" rate. Think of it in the same
context that your P&C agent uses when he quotes your car
insurance. It is the same concept and the client will understand
it.
WHEN IS A PROSPECT A STANDARD RISK?
This one seems obvious, but trust me . . . it isn't to most of us.
After you ask your client for their date of birth, ask them for
their height and weight! Once you know the answer, look in
your field underwriting guide provided by your life insurance
company and see if the height and weight excludes the prospect
from preferred or super preferred rates. DO NOT QUOTE
a preferred or super preferred rate to a guy who is 5' 8' tall and
weighs 220 pounds! He is a STANDARD risk at best.
I
may be misleading you a bit when I promise you the "Best
Kept Secrets" of the life insurance underwriting world. In actual
fact, these secrets have long existed in our books and
seminars, we just didn't pay much attention to them. They
may not be the best kept secrets, but they are surely the least
practiced. Today's cheap term rates have caused a tightening
of the underwriting procedures by the reinsurance companies
and consequently the underwriting procedures of the life insurance
companies. The agents and the clients need every advantage
that they can muster. Let's take these principles one
at a time and see if we can find a way to use them to help our
clients.
If you quote him a "super preferred" rate, and you can't deliver
a "standard" rate, you have caused a great deal of effort to be
wasted by you, your BGA and the company, AND you have
cost each a considerable amount of money. Always quote the
correct rate when you know it. Honesty is always the best
policy.
You may say that the competition forces you to show the best
rate and that may be true. However, after you have quoted the
super preferred rate to get in the door, it is your duty as a professional
to explain to the client the difference between the rate
classifications and how the qualifications work. Then tell him
that based on build, you are going to quote him a standard
rate. There is no point in taking the app and going through the
(expensive) underwriting process if you won't be able to place
the policy.
After the family history information, build is the second most
often missed pre-underwriting situation.
A family history of cancer or heart disease can also exclude
the prospect from receiving better than a standard rate.
THE DIFFERENCE - TOBACCO USE AND SMOKING
Most life insurance companies have their own definitions of
these two issues. However, when a company uses the Non
Tobacco phrase, they mean ANY kind of nicotine inducing item
(cigars, pipes, chewing tobacco, snuff, nicotine gum, etc.).
ALWAYS ask if they use ANY of these items. If they do - they
cannot qualify for a non tobacco rate. You must quote them a
tobacco rate.
NEVER MAKE THE UNDERWRITER GUESS
If you really want to help your client get life insurance, NEVER
make your underwriter guess! In the final analysis, all your
underwriter knows about your client is what he or she finds
written on pieces of paper. If you leave questions blank or
don't give complete answers, the underwriter has to assume
that if there is more than one scenario, that the worst scenario
will apply. Companies can go broke if the underwriter automatically
defaults to the good scenario every time. The questions
that most often are left blank are;
1) Occupation and Income of the Client.
2) Explanations for "yes" answers in the medical section.
3) Existing coverage and pending insurance.
4) Replacement of insurance questions AND replacement
forms.
5) Family history questions.
6) Name, address AND phone numbers of medical facilities
and doctors. Has the client applied for coverage elsewhere
and what will be the disposition of the other applications?
7)
NEVER leave the answer to a question blank. If the answer
is "none," then write NONE in the space - never leave it blank.
Buck's Law:
"Never make an underwriter guess. When you do - it will
almost always work against you or your client."
BEST KEPT SECRETS
REVEALED
FIELD UNDERWRITE FOR A BETTER PLACEMENT RATIO
Our biggest failing as field underwriters is to not ask enough
questions. Today, in addition to health history of the client, we
also consider the medical history of the parents and siblings in
determining the rate classification. This is because medical science
has proven that there are some medical conditions that are
handed down from one generation to another. If your father had
prostate cancer, your chances are 50% greater that you will as
well. You will find most of the proven hereditary conditions in the
area of heart disease and cancer, but there are other areas as
well. To improve your placement ratio in situations, you MUST
ask the family history questions BEFORE you quote the premium.
If you quote a preferred rate and family history causes the case to
be issued standard - your placement ratio goes down.
FIVE QUESTIONS TO ASK BEFORE YOU QUOTE THE CASE
1) You must ask the basic health questions BEFORE you quote
the case as well. Does your client have ANY medical history that
might affect the underwriting process?
2) Does he have now, or has he ever had diabetes, high blood
pressure, cholesterol issues, etc.?
3) Does he practice any hazardous activities (Scuba Diving, Skin
Diving, Auto Racing, etc.)? These types of activities can make a
big difference in the rate assigned.
4) What is his height and weight? This question is HUGE in today's
underwriting classifications. The companies are bound by
their reinsurance rules and cannot make a 5 pound exception for
your client. You need to know what his height is and what his
weight is with his clothes and shoes on BEFORE you quote the
rate. That is the way the examiner is going to weigh him and
measure him.
5) Did his mother, father, or siblings have cancer or heart disease
prior to the age of 60? You MUST know this BEFORE you quote
the case.
We will discuss many of these issues in more detail as we go
forward, but these are the issues most often missed in the pre-
underwriting phase of the sale.
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