Many agents walk away from potential sales because they think the client is too sick or too old to obtain coverage. Years ago, there was a true impaired risk market where companies such as US Life and State Life would underwrite cases using different criteria and many times accepted risks that other companies would not. That is no longer the case. Today, if we want to medically underwrite a case, we typically have our company of choice review the client’s medical records and give us their best offer. Although there is a difference in underwriting from one company to the next, it is nowhere nearly as dramatic as it was in the days of true impaired risk underwriting. There are fewer reinsurance companies, and most insurance companies tend to use the same reinsurers. There might not be much to gain by shopping a case today.
So, with that said, how to you place your rated cases? Here are the keys:
- Manage the expectations of your client. Many agents promise super preferred rates up front and then have to scramble when the case comes in standard or rated. Since the client expects super preferred premium, it can be very difficult to place the case at that point. You should always quote standard rates or rated if there are health issues. That will give you much more latitude to place the case when it is underwritten. Remember, they need to qualify for the coverage. Make it hard to get, not easy to get.
- Have strong relationships with enough carriers. It is hard to operate in this market with just one carrier. Generally speaking, you need enough outlets and access to underwriters for pre-sale underwriting assessments. It is always best to have an underwriter look at the medical records before you do a formal application. That way you won’t have a decline on your client’s MIB report if the case doesn’t look like it will be approved. Many of the simplified issue carriers ask if there has been a previous decline.
- If the case won’t work on a fully underwritten basis, be prepared to put together coverage with simplified issue companies. Typically, simplified issue companies don’t do medical exams and don’t review medical records. If the client qualifies based on the questions on the applications they will usually be approved with a phone interview. You will not be able to place millions of dollars of coverage this way, but you might be able to get $350,000 to $500,000 of coverage depending on the situation.
Simplified Issue Carriers
These carriers will let you place cases for people with lupus, COPD, cancer, heart disease, insulin-dependent diabetes, depression and many other ailments–many times at preferred rates. If you are going to place your cases with these types of carriers, it is important to work with an FMO who has access to enough carriers and knows where to go with the cases. This is not a cookie cutter business and each case can require a great deal of time to determine the best way to place the coverage. It is also not strictly a question of getting the best commission either. Some shops offer very high commissions, but you are pretty much on your own in terms of determining which carriers to use. These carriers will cover risks from age 18 to 95 and some as low as newborns.
Guaranteed Issue Carriers
There are also guaranteed issue carriers who will cover applicants from 18 to 80. In many cases coverage is available to age 85. Some of the simplified issue products can be sold over the phone, but most of the guaranteed issue products require a face-to-face visit. These products are typically graded from one to three years, meaning that a death from natural causes during the grading period usually results in a return of premium plus interest. If there is an accidental death during the grading period, they usually do pay the full death benefit.
Typically there is a phone interview in the home and that is the extent of the underwriting. The phone examiner will usually ask the same questions that are on the application and they will do an instant check of the MIB and the prescription database. The examiner will usually let you know on the spot if the applicant is approved. If the applicant is not approved the application must still be submitted.
Other Important Points
Most of these carriers will annualize the first nine months of commission and most renewals are very strong. Clients tend to keep these policies on the books if they are sold properly. Generally speaking, agent commissions are in the 90% range and some FMOs who do this have lead systems. It is not easy to generate 100% of your business from leads, but you can supplement your business with leads and place a large amount of business simply by not walking away from cases that you thought you had to avoid in the past.
The agent usually asks for only a VOID check and faxes that along with the application to the company. Most companies will draft the premium any time in the next 30 days and some carriers accept credit cards. Once the Home Office receives the fax, the case is usually approved in 48 to 72 hours and nine months of commissions is deposited directly into the agent’s account on a daily or weekly basis.
The cash flow can be very good once renewals and months 10, 11 and 12 are paid. There is sort of a snowball effect if you consistently produce.
This is a great market because these are true life insurance sales. People tend to buy these policies because they are concerned about their loved ones after their death. These are not cash value types of sales and they can be very gratifying not only financially but to the extent that we are helping our clients.