Underwriting 2012Underwriting 2012Myths and RealitiesMyths and Realities

Hank George, FALU, CLU, FLMI

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What did we learn What did we learn from the from the

2011 Underwriting 2011 Underwriting Requirements Survey?Requirements Survey?

• 36% of companies get an APS on 36% of companies get an APS on 31%31% oror moremore of their life applications of their life applications

• 34% 34% nevernever get an MD exam get an MD exam

• 81% screen with PSA; 98% of them require a 81% screen with PSA; 98% of them require a PSA at age 75+ and 93% do likewise at ages PSA at age 75+ and 93% do likewise at ages 85+85+

• 68% reflex to a Free-PSA test on some basis68% reflex to a Free-PSA test on some basis

POP QUIZPOP QUIZ

How would you assess How would you assess

a PSA test result a PSA test result

if the applicant if the applicant

was taking finasteride was taking finasteride

for BPH?for BPH?

You would have to You would have to DOUBLE ITDOUBLE IT

to accurately reflect to accurately reflect the applicant’s the applicant’s

TRUETRUE PSA levelPSA level

• 50% of companies get 50% of companies get fewerfewer resting ECGs than they resting ECGs than they did 5 years agodid 5 years ago

• 35% do 35% do nono exercise ECGs exercise ECGs

• 58% doing them don’t order one at age 55 until the 58% doing them don’t order one at age 55 until the face amount exceeds $5,000,000face amount exceeds $5,000,000

• 80% say they should 80% say they should nevernever be ordered over age 70 be ordered over age 70

• OnlyOnly 12% expect them to be around in 5 years 12% expect them to be around in 5 years

• OnlyOnly 8% screen with chest x-rays on any basis 8% screen with chest x-rays on any basis

• 43% 43% screenscreen with HbA1-c with HbA1-c

• 39% 39% screenscreen for microalbumin for microalbumin

• 77% use pharmacy profiles; 21% say they 77% use pharmacy profiles; 21% say they intend tointend to

• 87% screen with MVRs87% screen with MVRs

• 29% use court/criminal records29% use court/criminal records • 62% do teleinterviews with drilldowns… 62% do teleinterviews with drilldowns… but but

only 30% require producers to use only 30% require producers to use them on all cases!them on all cases!

• 15% 15% screenscreen for HCV antibodies and 82% for HCV antibodies and 82% order this test reflexivelyorder this test reflexively

• 15% do it based on ISOLATED GGT 15% do it based on ISOLATED GGT elevation…elevation…but only 5% do so when the but only 5% do so when the insured as tattoos insured as tattoos

• 83% use alcohol markers83% use alcohol markers

• 74% order CDT when there is an isolated 74% order CDT when there is an isolated elevation of GGT…elevation of GGT…but only 18% get CDT but only 18% get CDT when MCV is elevated on an APSwhen MCV is elevated on an APS

What are the 3 What are the 3 ABSOLUTE INDICATIONSABSOLUTE INDICATIONS for an alcohol marker?for an alcohol marker?

• History of drunk drivingHistory of drunk driving

• History of alcohol use disorder History of alcohol use disorder

• Elevated MCV in the absence of other Elevated MCV in the absence of other evidence of alcohol abuseevidence of alcohol abuse

42% use NT-proBNP42% use NT-proBNP

The other 58% The other 58%

are making are making

a foolish mistake!a foolish mistake!

8% screen with CEA8% screen with CEA

2% are thinking about it2% are thinking about it

Hopefully, Hopefully,

the other 90% the other 90%

have more sense!have more sense!

POP QUIZPOP QUIZ

Which Which

cognitive screening test cognitive screening test

that insurers use that insurers use

isis

essentially garbage?essentially garbage?

CLOCK DRAWINGCLOCK DRAWING

• Almost Almost impossibleimpossible to consistently to consistently interpret accurately according to interpret accurately according to experts… experts… and we do not use and we do not use experts to interpret themexperts to interpret them

• UselessUseless for detecting mild cognitive for detecting mild cognitive impairment… impairment… which is far more which is far more prevalent in elder applicantsprevalent in elder applicants

13% of 13% of companies companies screen for screen for marijuana marijuana

useuse

The The Inconvenient Inconvenient

TruthTruth

Based on a review of the global literature, Based on a review of the global literature, recreational marijuana use by adults…recreational marijuana use by adults…

• Confers Confers nono COPD risk COPD risk

• Is Is notnot linked to lung linked to lung oror head/neck carcinoma head/neck carcinoma

• Is Is notnot an independent CV risk factor an independent CV risk factor

• Has Has nono increased risk of psychiatric impairment increased risk of psychiatric impairment

• CannotCannot per seper se induce psychosis induce psychosis

• LoweredLowered risk of car crashes in some studies; lower risk of car crashes in some studies; lower overall risk than in cigarette smokersoverall risk than in cigarette smokers

• Has Has nono excess mortality in any credible study excess mortality in any credible study

And,And, Cannabis Cannabis is an effective Rx in over 10 disorders is an effective Rx in over 10 disorders

It is It is grossly inappropriate grossly inappropriate

to charge “tobacco/nicotine user” rates to charge “tobacco/nicotine user” rates

to marijuana users who do notto marijuana users who do not

alsoalso smoke tobacco smoke tobacco

There is There is no credible basisno credible basis for for

arbitrarily denying “preferred” arbitrarily denying “preferred”

to adults self-reporting marijuana to adults self-reporting marijuana

use on an occasional basisuse on an occasional basis

Which 3 criteria Which 3 criteria in a “thin” melanoma in a “thin” melanoma collectively make it a collectively make it a

substantially worse risksubstantially worse risk than currently reflected than currently reflected

in underwriting guidelines?in underwriting guidelines?

POP QUIZPOP QUIZ

• ≥ ≥ .075 mm measured thickness.075 mm measured thickness

• Level III or IV invasion Level III or IV invasion oror horizontal growth patternhorizontal growth pattern

• ≥ ≥ 85% regression85% regression

Why will Why will most life insurers most life insurers

build or buy build or buy an underwriting engine?an underwriting engine?

Because it cost-effectively Because it cost-effectively expedites the approval expedites the approval

of “clean cases”… of “clean cases”… such that underwriters such that underwriters

can focus entirely can focus entirely on those cases on those cases

that require their expertisethat require their expertise

What is the What is the #1 problem#1 problem

insurers say they insurers say they encounter after encounter after

purchasing purchasing an underwriting engine?an underwriting engine?

Writing Writing “rule sets” “rule sets”

to adapt the engine to adapt the engine to their to their

underwriting practicesunderwriting practices

FACTFACTUnderwriting enginesUnderwriting enginespose no significant pose no significant

occupational riskoccupational riskto underwriters!to underwriters!

In the 2011 In the 2011 Underwriting Engine SurveyUnderwriting Engine Survey

• ““Reducing the workload on Reducing the workload on underwriters”underwriters” ranked among the top ranked among the top 4 motives for deploying an engine4 motives for deploying an engine

• ““Reducing underwriting staff”Reducing underwriting staff” ranked (dead) last among their motivesranked (dead) last among their motives

POP QUIZPOP QUIZ

What isWhat is

BUTT ROCKET?BUTT ROCKET?

A street term A street term for methamphetamine…for methamphetamine…

specifically alludingspecifically alludingto its to its

route of route of administration!administration!

Underwriting-RelatedUnderwriting-RelatedPredictive ModelsPredictive Models

• Based on lab test results and Based on lab test results and paramedical measurementsparamedical measurements

• Based on personal purchase recordsBased on personal purchase records

What is What is fundamentally wrongfundamentally wrong

with using with using personal purchase personal purchase

recordsrecords in underwriting?in underwriting?

#1 – It is 100% inference-based#1 – It is 100% inference-based

#2 – It will ignite tremendous #2 – It will ignite tremendous justifiedjustified angst angst amongst producers, proposed insureds, their amongst producers, proposed insureds, their physicians and regulatorsphysicians and regulators

In the 2011 Requirements Survey, In the 2011 Requirements Survey, the substantial majority of chief underwriters the substantial majority of chief underwriters

were opposed to doingwere opposed to doing personal purchase record predictive modeling personal purchase record predictive modeling

for a variety of excellent reasonsfor a variety of excellent reasons

What is the What is the huge paradigm shifthuge paradigm shift

underwriters must embrace underwriters must embrace when using when using

predictive scoringpredictive scoringbased onbased on

lab tests and lab tests and paramedical measurements?paramedical measurements?

““All normal tests All normal tests are normal, are normal,

but some normal tests but some normal tests

are less normal are less normal than other than other

normal tests”normal tests”

All of the following are affectedAll of the following are affected

• High normal GGTHigh normal GGT• Below normal and high normal ALTBelow normal and high normal ALT• Below normal and low normal bilirubinBelow normal and low normal bilirubin• High normal alkaline phosphataseHigh normal alkaline phosphatase• Below normal and high normal cholesterol, HDL-C and triglyceridesBelow normal and high normal cholesterol, HDL-C and triglycerides• Low normal serum albuminLow normal serum albumin• High normal creatinineHigh normal creatinine• Low BUNLow BUN• High normal glucoseHigh normal glucose• High normal albuminuriaHigh normal albuminuria• PrehypertensionPrehypertension• Low blood pressure in elders Low blood pressure in elders • Underweight Underweight • Overweight at BMI 27.5 – 29.9 Overweight at BMI 27.5 – 29.9 • High normal resting heart rateHigh normal resting heart rate

Unresolved Questions

• How willHow will PRODUCERSPRODUCERS react when a client qualifies react when a client qualifies for preferred based on published practices…for preferred based on published practices…but has but has a high (unfavorable) risk score?a high (unfavorable) risk score?

• How willHow will REINSURERS REINSURERS respond when an applicant respond when an applicant does not qualify for preferred based on your agreed-does not qualify for preferred based on your agreed-upon criteria…upon criteria…but has a low (favorable) risk score?but has a low (favorable) risk score?

• How will How will ATTENDING PHYSICIANSATTENDING PHYSICIANS react when their react when their patients are denied preferred coverage or rated patients are denied preferred coverage or rated based on based on “normal”“normal” tests and measurements? tests and measurements?

POP QUIZPOP QUIZ

What mechanism What mechanism

has now been shown has now been shown

to reduce or prevent to reduce or prevent

detection of detection of

benzoylecgonine benzoylecgonine

in bodily fluids? in bodily fluids?

According to Venkatratnam et al According to Venkatratnam et al at John Jay College of Criminal Justice at John Jay College of Criminal Justice

in New York City,in New York City,

ZINC SULFATEZINC SULFATE“can be an effective “can be an effective

adulterant”adulterant” preventing detection preventing detection

of cocaine useof cocaine use

Journal of Analytical Toxicology. 35(August/September, 2011):333Journal of Analytical Toxicology. 35(August/September, 2011):333

Thank you for your attention

LIVE LONG AND LIVE LONG AND PROSPER!PROSPER!

Peace,Peace,

Hank Hank