Navigating a better life insurance application process.
When a client applies for life insurance, an advisor works with them to complete the necessary documents in a timely fashion. The goal is to obtain the best possible coverage with the least amount of inconvenience to the client. Whether it’s an electronic or an old-school paper application, there are certain things that can interrupt the process – and this is where Manulife’s underwriting team comes in to offer some time-saving advice. Details please! Wanda Slaunwhite oversees a team of experienced underwriters and says there are a few things that can help to keep the underwriting process moving along smoothly and efficiently. Her biggest piece of advice would be that less is not always more. “We need as much information as you can provide us because it gives the underwriter more opportunity to make a better decision,” says Wanda. “When an advisor provides the complete picture of their client, it streamlines the decision-making process.”
“If you’re an advisor and send an application in with that information, the underwriting team is likely going to look at that application and have some questions,” says Wanda.
As an advisor, put yourself in the shoes of the underwriter and think about the information they need to assess the risk. In the above scenario, consider these questions you could ask your client to learn more:
- Does your client have any significant health history?
- Are they taking any prescription medications?
- Is the client working full-time?
- Have they had any significant time off work due to their medical condition?
- Do they exercise?
“When an underwriter sees this type of detail on an application, it could mean the difference between a decline and a standard policy,” says Wanda. “The golden rule of underwriting is – the more information you can provide, the better. We need as much as you can give us. It gives the underwriter the opportunity to make the best decision.” Check out this E-Business Solutions Guide for information on e-applications, e-signatures, accelerated underwriting, and more.
Beneficiaries
Another common underwriting issue with insurance applications is the choice of beneficiary. Manulife underwriter Stephanie Neklia says it’s not always in a client’s best interest to choose ‘estate’ as the beneficiary.
“When an applicant doesn’t choose a beneficiary at all, the beneficiary defaults to estate, and that isn’t always the best choice,” says Stephanie. “If the client has a spouse or children, it might be better that they name them directly as the beneficiary. If the proceeds are paid to the estate, they are subject to probate and the creditors of the estate. This could cause delays and additional costs. In the meantime, the insured’s family may need that money to pay their bills, their mortgage, and funeral costs.”
Consider sending your clients a link to this article, which explains more about the probate process.
As a precaution, expect that the underwriting team may ask you if the client really meant to choose estate as the beneficiary. It may very well be confirmed that ‘estate’ was the intended choice as the client doesn’t have a next of kin or they have chosen this designation to pay taxes owing by the estate.
For more information, see our Advisor’s guide to beneficiary designations.
Understanding ownership
Another potential issue to consider is ownership of a policy, especially personal coverage when the owner is other than the insured. For example, when the parent is noted to be the sole owner of a policy on their adult child. “From an underwriting standpoint, I understand the concerns that parents may have in signing over control of a policy that they are paying for,” says Stephanie. “Often the parent’s concerns are that their child can change the beneficiary, take the cash value, or just cancel the policy altogether without the parent knowing. When we’re looking for confirmation about ownership, we’ll suggest having the child as a joint owner so they do have some privileges of ownership, but are prevented from making a big change without their parent’s input.”
Other options include naming an adult child as a successor or subrogated policy owner. This allows the policy to pass automatically to the adult child if something happens to the parent (owner). A policy can also be set up with an irrevocable beneficiary – meaning a beneficiary needs to sign off on certain changes. With this option, if a parent is really concerned about being taken off a policy, they’ll be aware if their child decides to make any beneficiary changes.
This Ownership of life insurance – Planning considerations (manulife.ca) document has more information.
When a client quits smoking
Quitting smoking is an admirable achievement, but it’s important to understand that it may not always result in a positive impact on a client’s life insurance policy premiums.
“While quitting smoking is great, it doesn’t automatically mean a reduction in your insurance premiums,” says Wanda. “There may be other serious new health issues to take into consideration, such as high blood pressure or diabetes. If someone is in perfect health, and has been a non-smoker for at least a year, then submitting an application to change to non-smoker rates would make sense.”
An application for change to non-smoker status requires the client to answer all application medical questions. The underwriting team reviews the case for ways to approve the non-smoker change.
“Often, we’ll see cases where a client says they’ve quit smoking and it’s been prompted by a health issue, such as a heart attack and their doctor has told them to quit smoking. Their insurability has now changed because of the heart attack and they may not qualify for non-smoker rates” says Stephanie.
Referrals
When an advisor sees that a life insurance application has gone for a referral, they may be concerned. A referral doesn’t mean something is wrong – it’s more likely that the underwriting team is taking a closer look to make the best possible decision.
“For example, we have a cardiologist on staff who can look at applications with any cardiac history. They offer their expert opinion on the state of the client’s health and how we would assess the application. By referring a case, we’re trying to get your client the best offer.”
Manulife underwriters may refer your case to directors, consultants, and medical experts to review issues such as more complicated cancer or cardiac risks, or even a specific financial risk. Ultimately the goal is to get your client the best coverage possible, at the best rate.
Training
When it comes to insurance applications, there’s a lot of details to understand about the underwriting process. These Manulife CE Centre courses can help: Introduction to underwriting (CIAM login)
- Principles of Underwriting
- Case adjudication Income ratios
- Credit Bureau Collateral; and
- Making deals work
Oops, I forgot to mention that! Does it matter? (CIAM login)
- A foundation of claims and underwriting
- The misrepresentation (both innocent and fraudulent)
- Reinforced learning through scenarios and case studies
Stay on top of the latest underwriting trends and innovations with Risky Business – offering insight from Manulife’s Chief Underwriter Karen Cutler. Additional life insurance business supports can also be found here on Advisor Portal.
