The Underwriter’s Role in the Life Insurance Industry

1. The Underwriter’s Role in the Life Insurance Industry Sheila Filipi CLU, FLMI, ACS Leadership Development Associate State Farm Life Ins. Co.

2. Overview • Competition in the Life Insurance Industry • Where does Underwriting fit in? • Role of the Underwriter • Risk Classification • Underwriting Tools • Types of Risk • The Underwriting Decision • Case Study • In the News

3. The Competition • Mutual versus Stock • Multiline versus Life only • Financial Services organizations

4. Where does Underwriting fit in? Pricing • Mortality • Persistency • Expenses • Investments

5. Role of the Underwriter • Risk selection • Product knowledge • Producer support • Customer advocacy • Support of organizational goals

6. Life Underwriting The Key: Understand the complete picture and know what’s important It’s about BALANCE – obtaining the right type and amount of information to appropriately classify the risk

7. Underwriting Tools • Application • Examinations • Interviews/Questionnaires • Blood/Urine/Oral Fluid • EKGs • Prescription Drug History • Attending Physician Statements • Motor Vehicle Records • Inspection Reports • MIB

8. Types of Risk • Medical Risk • Financial Risk • Motor Vehicle Risk • Foreign Travel/Residence Risk • The Occupational Exposure • Avocation • Aviation • Personal Risk

9. Other Considerations • Insurable Interest and Ownership • Beneficiaries • Antiselection

10. Risk Classification • Often times use a standard manual • Average or “standard” mortality risk represented by a value of 100% • Factors that impair or improve mortality are assigned debits and credits accordingly • Overall risk is given a score that translates into a final rating • Judgment of Underwriter is needed to adjust for variable factors given the specifics of any individual case

11. The Underwriting Decision • Discounts from Standard (ex: Preferred, Super Preferred) • Table Ratings • Flat Extras

12. What would be your decision? • Case Study • Coverage: $150,000 Term policy • App date: 3 days ago • Gender: Male • Age: 37 • Marital Status: Married • Occupation: Laborer • US/Canadian Citizen: yes • Tobacco use in the last 12 months: yes • Beneficiary: Spouse • Application medical history: work physical 6 months ago Dr. Adams • Underwriting requirements: blood, urine, vitals, interview, motor vehicle report • What needs to be investigated from the app? • The MVR is received: no violations and a valid license • Interview is received: physical 6 months ago all within normal limits, takes albuterol for exercised induced asthma no emergency room visits or hospitalizations sees Dr. Smith, and metformin for diabetes hem A1C is under good control see’s Dr. Phillips. • What are we concerned with? • Labs and vitals are received: labs – hem a1c = 6.7 (good control), height and weight is 5.10.275 (normal weight for this height range is around 200lbs) • What are we concerned with? • Medical records are received. Show diabetes is type 2 diagnosed 2 years ago medication is metformin daily. Good control. Struggle with weight however has maintained current weight 5.10.275 for 3 years • What should we do?

13. In the News • Stranger-Owned Life Insurance • Simplified Issue Products • Genetics and Underwriting • Epidemics • Privacy • Underwriting Manuals

14. Q and A