With life insurance, the underwriting task involves the collection of detailed personal information, which may seem intrusive to your clients. Rest assured, every question has a distinct purpose. Let’s go behind the scenes to find out why.


Different types of underwriting

Traditional (or “full”) underwriting is the comprehensive process which involves an application, a health questionnaire, a medical exam and lab testing (blood and urine). The key underwriting considerations listed above are manually reviewed and evaluated by the underwriter. Due to its thorough nature, traditional underwriting typically yields more affordable premiums. But expect longer turn-around times for policy approval, perhaps months. 

With traditional underwriting, an applicant’s medical disclosures are verified by the Medical Information Bureau (MIB). The MIB is a resource for underwriters to uncover medical information errors or omissions on insurance applications to prevent fraud or misrepresentation of health data. The underwriter compares the MIB report with physician statements (if required), prescription medication history, medical exam and lab results, and lifestyle and family history to fully evaluate the physical condition of the applicant.

In addition, underwriters consult actuarial tables—also called mortality tables—to estimate life expectancy. These statistical modeling techniques help insurers with pricing and event probabilities, such as illness, disability and death.

Automated underwriting substitutes the human underwriter with computer automation. The results are rapid underwriting decisions that are less prone to subjectivity. 

The technology gathers information from the application and third-party data sources—such as motor vehicle records, credit reports, medication history and medical databases—and uses algorithms and predictive analytics to evaluate an applicant’s risk. If your client is considered low risk, in some programs they can bypass the medical exam. Automated underwriting brings both speed and accuracy to the decision-making process, benefiting both client and carrier.

Note that third-party data sources yield comprehensive, detailed and historic information. Encourage full disclosure as your client may not realize the relevance of a past experience and inadvertently cause it to be flagged during underwriting. 

Accelerated underwriting—also known as instant decision life insurance—streamlines the underwriting process by foregoing medical exams and lab testing. Instead, this type of underwriting gathers data from third-party external sources to quickly process applications, often the same day. Accelerated underwriting is best suited for applicants with good health histories and clean financial and criminal records. If your client doesn’t qualify, consider the traditional underwriting route. 

Accelerated underwriting is widely available from a variety of insurers as the life insurance industry is rapidly migrating to this technology. Corebridge Financial, for example, offers accelerated underwriting under Agile Underwriting (AU+) for Term, Indexed Universal Life and Guaranteed Universal Life policies.

Simplified underwriting features an uncomplicated application process and is a good option for seniors, applicants with considerable health problems and those that need coverage quickly. The applicant answers minimal health and lifestyle questions and no medical exam is required. Note that approval is not guaranteed. Premiums may be higher and coverage amounts more restrictive due to the small amount of information available to predict risk. 

There are also options that require no medical underwriting. For instance, with guaranteed issue life insurance, acceptance is guaranteed if age qualifications are met. This type of “no questions asked” life insurance has a caveat: there is a waiting period, usually two years, to collect benefits if one dies from anything other than an accident. Coverage limits are low and premiums can be high; however, it is a solid choice for those with health problems who have been declined from other types of policies.


Underwriting examples

If your client has a history of medical difficulties in the past but is healthy today, traditional underwriting is ideal. A current physical exam and blood work will substantiate the positive change in wellness and return more favorable quotes. 

If your client has life-threatening medical issues and/or has been declined coverage due to health status, opting for a guaranteed or simplified underwriting program may be a necessary step to securing a policy. Red flags for underwriters include critical illnesses, obesity and drug use—all of which will be uncovered by the medical underwriting process. But life insurance choices still exist for these clients.

If your client participates in inherently dangerous hobbies, understand that any type of underwriting—except guaranteed issue—may result in disqualification. This is because the risks involved in any extreme sport or high-risk activity greatly increases the likelihood of a premature death. One can also explore accidental death riders, an add-on to a life insurance policy ideal for riskier lifestyles.

If your client needs immediate coverage, has a clean health history and low-risk hobbies and occupation, then accelerated underwriting is the option to explore. Technological improvements have led to an easy on-line application process with many insurers, allowing companies to create quick, yet tailored, life insurance quotes in a matter of minutes. Bear in mind that unhurried clients willing to undergo traditional underwriting—usually a 30-to-90-day process—will typically reap more affordable premiums, higher coverage levels and more options to customize the policy.


Keep in mind

Though the process may seem cumbersome, underwriting evaluates risk to a critical degree to ensure coverage at competitive terms and to as wide a range of the population as possible. This, in the end, is good news for your clients.



Key underwriting considerations

Underwriting reviews an applicant’s health, lifestyle and behaviors to evaluate risk. Help prepare your client by discussing these factors:

  • Age—premiums are lower for younger people
  • Gender—women typically receive lower rates due to increased longevity
  • Medical history—including diagnoses, medications, family history and tobacco/drug use
  • Occupation—hazardous jobs, such as pilots, increase risk level
  • International travel—frequent travel to unstable countries may pose a problem
  • Dangerous hobbies—like cliff diving—assume more risk
  • Driving record—speeding tickets and DUIs will be considered
  • Income, credit history and net worth assessment will also be considered


Classification Ratings

An insurance classification rating is established from the information gathered during underwriting. These ratings determine eligibility, coverage amounts and cost, and typically fall into these categories:

  • Preferred Plus—excellent (lowest premiums and risk level)
  • Preferred—very good
  • Standard Plus—good (average premiums and risk level)
  • Standard—fair
  • Table Ratings—suboptimal (highest premiums and risk level)