Critical considerations around more extreme vetting, medical marijuana, ‘no medical exam’ price wars and more
TIM, Making Money, Merilee Kern, MBA
New laws, emerging technology, fiscal uncertainty and changing marketplace perceptions are making big impacts on the life insurance industry, changing the landscape for consumers in many ways. This includes everything from how applications are filled out to how quickly coverage can be obtained to evolving rules surrounding drill down topics like marijuana procurement and use.
“Given the copious complexities, far too many put off buying life insurance or revising a current plan,” says field authority Brian Greenberg, founder and President of the innovation-driven TrueBlueLifeInsurance.com agency. “Frustrated consumers cite high premiums and a glut of red tape among the reasons they shy away from purchasing or modifying a policy. However, some key common barriers and challenges that once blocked shoppers from securing great coverage benefits with ease—and at affordable prices—are a thing of the past. Other changes impact one’s ability to garner coverage at all.”
Specifically on both fronts, here are Greenberg’s top 5 trends affecting both life insurance consumers and life insurance agents, themselves:
1) No medical exam policies gain ground amid enhanced access and affordability.
No medical exam policies have always been popular, but consumers traditionally paid from 20 to 50 percent more than they would for policies requiring a medical exam. But no more, as equitably priced options are entering the market. As just one example, Savings Bank Life Insurance Company (SBLI), one of the most competitively priced term life insurance carriers, recently came out with a no medical exam option at the same exact price as their fully underwritten policies in the $500,000 and below bracket.
As many other major insurance companies follow suit, the rest of the industry is realizing a “domino effect” whereby those offering no medical exam policies are lowering their prices in this same $500,000 and below bracket in order to compete. In addition, no exam policies are being issued least 50 percent faster than those requiring a medical exam, safeguarding consumer interests at a more expeditious pace.
2) Life insurance companies engage in more extreme vetting.
Especially without the benefit of a medical exam, insurance companies are looking to other sources for information as they consider a new policy application. In addition to vetting practices like checking the prospective insured’s motor vehicle department report, Medical Insurance Bureau (MIB) report and pharmacy report, there’s another somewhat surprising background information source insurance companies are utilizing: a credit report.
In greater numbers, life insurance companies are running financial checks with the mindset that a person’s financial background is a major factor in their life expectancy. Credit score, bankruptcy and tax liens are some of the fiduciary factors that can cause an application to either be declined outright, or to result in a policy being issued at a higher premium.
When insurance companies can access a more holistic information set that includes financial records, they can make far quicker underwriting decisions—for better or for worse.
On the upside, this is increasing the incidence of same day policy turnaround. Industry-leading life insurance outfits like North American Life Insurance Company, Mass Mutual and Fidelity are now offering applicants same day issue life insurance policies, and this year yet more companies will be making instant underwriting decisions for prospective customers.
Aside from the ease and instant gratification benefits in general, this is especially good news for those who need life insurance quickly—whether to secure a business loan, finalize a divorce, or other financial or legal reason. As underwriters have become more resourceful in gathering applicant data and with intra-industry technologies allowing them to analyze and process that data more efficiently and accurately, agents are enabled to provide streamlined services to customers—a trend that’s fiscally benefitting the marketplace and the trade, alike.
3) Medical marijuana a non-issue.
The legalization of medical and recreational marijuana in several states is causing major changes in how life insurance companies rate and cover applicants. While ratings and premiums vary among insurance companies, overall there is a strong trend toward not rating marijuana users—whether medical or recreational—the same way as they do cigarette smokers. This is great news for marijuana users, since insurance rates for smokers basically double or even triple the cost of life insurance.
As one noteworthy example, Prudential Life Insurance Company now regards marijuana, especially prescription-based, the same as any other type of medication. Their ratings are based on a person’s underlying health condition rather than this, or other, treatment course.
The key point to remember is that life insurance companies are looking at a given health condition, not the medication used to treat the condition. This means that, especially with marijuana-friendly life insurance companies, you could conceivably use marijuana without it impacting your ability to obtain great ratings by life insurance carriers. However, keep in mind that not disclosing marijuana use that turns up in a urine sample you’re required to supply will usually cause a decline in rating.
4) Ageism is no longer a barrier to entry.
Don’t make the mistake of thinking that once you’re past a certain age, you can no longer get affordable life insurance. Regulators have revised life-expectancy projections — known as mortality tables — for the first time since 1980. A man who is 40 years old today can expect to live to be 78, not 73, as was the expectation 25 years ago. Because of this, an 80-year-old male can get a 10 year term policy and an 85-year-old can still get a fully underwritten whole life policy.
As we get older we experience more medical issues. Anyone over 50 or someone with known medical issues can work through an experienced agent to handle their life insurance needs. This agent will contact underwriters of multiple insurance companies to discuss the nuances of your particular application before applying in order to avoid the client being declined or adversely rated in the MIB. This agent-driven process also allows for insurance companies to compete against each other to get the best rate. An independent agent or brokerage can also best ensure flexibility and customized service.
5) Policyholders leveraging life insurance plan benefits while still alive.
Today’s New Living Benefits riders enable you to use your life insurance policies while you are alive. For example, the accelerated death benefit rider allows you to use up to 75 percent of your coverage amount if you have a terminal illness. The chronic illness rider allows you to use up to 90 percent of the policy’s death benefit if you are unable to perform two of the six daily living requirements of bathing, continence, dressing, eating, toileting, and transferring. This is very similar to a Long Term Care Policy. Companies leading the way for living benefits riders are Transamerica and Protective Life Insurance. There is also a critical illness rider which allows you to use up to 90 percent of the death benefit of your policy if you suffered a critical health condition such as cancer, heart attack, stroke, a major organ transplant, end stage renal failure, ALS, blindness, or paralysis of two or more limbs.
Life insurance companies realize people are living longer. This is good news for everyone. No longer are great benefits only for the young or for those willing to pay high premiums and jump through multiple hoops. The insurance industry has listened and has responded to the needs of the consumer in order to streamline the application process and deliver benefits that make sense. Now not only can you get life insurance at any age, but you can also enjoy those benefits during your lifetime. It doesn’t get much better than that.