Texas-Wide Underwriting Conference, April 2011

1. UNDERWRITERS & DEPOSITIONS: Don’t be made to look the “Fool” Texas-Wide Underwriting Conference, April 2011 Daniel Perkins, JD, MBA, FALU Attorney and Counselor at Law

2. Two-Part Discussion Theory of underwriting as it applies to the legal foundation for providing testimony at time of deposition or trial Nuts-and-bolts considerations to avoid being made the “Fool” at time of deposition or trial 2

3. Main Themes on U/W Theory • Is the methodology used one that is scientifically proven to be accurate with a high degree of accuracy? • Does the underwriter understand the theory behind the methodology, and can the underwriter apply the methodology to factual and hypothetical situations? • TRAP: Tested, Rate of error, Acceptance, Peer review 3

4. T: Methodology Tested? Yes, the numerical rating system has been used for approximately 90 years and has been extensively validated in the scientific and actuarial communities. 4

5. R: Rate Of Error? For the methodology, what is the known or potential rate of error? Are the latest improvements in mortality and morbidity reflected in the rating criteria used? Does the underwriter correctly apply the numerical rating system? 5

6. A: Acceptance of Methodology? • The numerical rating system has been extensively validated in the scientific and actuarial communities. • Courts have accepted the validity of the risk classification system but require that it be based on sound actuarial principles or actual and reasonably anticipated experience. 6

7. P: Peer Review Of Methodology? • Research papers • Mortality studies • Medical abstracts • Underwriting manuals 7

8. A Couple Of Useful Definitions by dp Actual and Reasonably Anticipated Experience: Knowledge gained in accordance with sound thinking as to existing facts and those facts expected in the future (ARAE) Sound Actuarial Principles: Assumptions of future anticipated experience, based on valid reasoning (SAP) 8

9. Do’s and do not’s : Phases File Manual Preparation Deposition Experts 9

10. Do’s and do not’s : File • Meet or exceed all required govt. regulations for the processing of insurance applications • Follow all company procedures and guidelines, and provide analysis if not done • Underwriting notes should be detailed enough to allow a third-party to read and understand them years into the future • The appraisal of the risk should be based on SAP and/or ARAE, and show a logical progression of analysis 10

11. Do’s and do not’s : File Have conformity in abbreviations No funny comments in file, internal correspondence, external correspondence, etc. For MD referrals, provide tentative assessment by underwriter Consistently do the activities noted on these two slides, and do them correctly (reasonably) 11

12. Do’s and do not’s : Manual Need correct version of underwriting manual, both ratings section and explanatory material Take complete copy of manual to deposition: do not forget any linked material—ex. Definitions Manuals typically call themselves “guides” but they are actually the “rules” 12

13. Do’s and do not’s : Preparation • Reinsurance involvement needed? Review treaty? • Do not volunteer to testify • If chosen, prepare as thoroughly as possible • Work with your attorney to identify all relevant issues and points for discussion (earlier rather than later) • Organize underwriting file by receipt/analysis 13

14. Do’s and do not’s : Preparation • Create identifiable underwriting files for each period of underwriting as well as a claims file • Review all relevant documents in detail but do not try to memorize all information • Review the insurance policy that is the subject of the lawsuit to develop familiarity with contents • Know and be able to discuss all underwriting related sections of the insurance policy 14

15. Do’s and do not’s : Preparation Know, in general, the department functions or activities that relate to underwriting, ex. policy assembly Be prepared to discuss the theory of underwriting in general, as well as the specific theory (and facts) for the policy the subject of the lawsuit Prepare notes for deposition in detail 15

16. Do’s and do not’s : Deposition • Most lawsuits won or lost on basis of depositions and not at trial • What do you say if asked “What is underwriting?” Can you explain it in layman’s terms? • Know what you know and know what you do not know • Depositions can last for hours, eat before you get started 16

17. Do’s and do not’s : Deposition If necessary, bring snack food to consume during breaks Control the clock: If you need a break, ask for it and do not wait for attorney to suggest one At time of deposition, it is OK to be nervous if it helps get your adrenaline pumping Remember, you as the underwriter know more about underwriting than the attorneys 17

18. Do’s and do not’s : Deposition • However, attorneys are trained and experienced in learning new fields of knowledge • The easiest question to ask is often the hardest to answer: “Why?” • Listen closely to the question so you know what is being asked (and hopefully why) • Only answer the question asked and be succinct, except when (?) 18

19. Do’s and do not’s : Deposition If you do not remember the entire question, ask the attorney to repeat it If you do not understand the entire question, ask the attorney to re-phrase it Be careful about opining on subjects outside the scope of your knowledge as an underwriter 19

20. Do’s and do not’s : Experts Consider retaining a consultant or expert witness early in the litigation Provide information to consultant or expert as soon as possible Provide consultant or expert with complete information Make the consultant or expert’s job easier by doing everything previously discussed 20

21. Contact Information Danny Perkins Law Office of J. Daniel Perkins 105 S. Tennessee Street, Suite 101 McKinney, Texas 75069 Ph: 972-529-1111 Fx: 972-542-9149 Em: danny.perkins@jdperkinsattorney.com Website: www.jdperkinsattorney.com Re-locating as of April 1, 2011 with new address and fax number 21