Life Underwriting Reality An Independent’s Assessment Hank George, FALU, CLU, FLMI Educator, Consultant & Curmudgeon Presented at ACLI Reinsurance Executive Forum January 10, 2012 in Naples, Florida

Hank who? Lay medical officer/medical manual writer at Northwestern Mutual, 1973-1985 Senior Vice President/Client Support at HORL/LabOne, 1987-2002 President of Hank George, Inc., 2002-present 175 medical underwriting courses; mean 25 pages and 100 literature references 400 books and articles; only books ever for producers about underwriting Creator of world’s only super-simplified medical manual Hank’s Rx Guide on-line pharmaceutical underwriting resource 50 seminars for Society of Actuaries 150 insurance and medical organizations addressed on 5 continents 2-time MDRT main platform speaker Founder and first chair, LOMA International Underwriting Congress Author of free 30-page monthly Hot Notes with 1700 subscribers in 55 countries Free information clearing house site InsureIntel with 1500 registered members 2 life underwriting study groups; 60+ members Columnist in NAILBA Perspectives, Best’s Review, ALUCA Risk-e-Business, On the Risk Annual “Developments in Underwriting” lead article in LOMA Resource

This Roadmap is available free on-line

Every reinsurance underwriter should spend 3 months working for a brokerage market insurer. Then, another 3 months working for a brokerage general agency.

Life Insurers and “Engines” Revelations from the 2011 Underwriting Engine Survey

Engine Use Status

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Why are n + 1 software firms, service vendors and reinsurers SALIVATING over the engine market?

“Where did/will you get your engine?”

“Why do you covet an engine?” #1 Reduce “app-to-issue” cycle time #2 Lower acquisition costs #3 Improve underwriting data As ranked by respondents

Miles to go… % “fully-underwritten” accepted by engine without intervention by Homo sapiens

Engine Peddler Snake Oil “Customizing our generic rule sets is a snap!” “You can make your own rule sets…it’s easy!” “You’ll have it up and running in no time!”

Purchase-to-Operational Interval Designated as #1 Engine Drawback “Time to and cost of implementation”

SUPER-SIMPLIFIED LIFE

YES! 60.4% of Study Group Member Respondents “Do you offer or plan to offer within the next 3 years a super-simplified life product for the middle market?” YES! 60.4% of Study Group Member Respondents

Super-Simplified Formula 7 to 14 risk-related questions Drivers: teleinterview, Rx profile, MIB, MVR Preferred, standard and one rated class (At least) $250-500K to age 40/45 Price competitive with fully-underwritten Targeting “middle market” Alternative distribution prominent

What would YOU say to reinsurer CEOs? “Reinsurers need to be on the cutting edge in partnership with their clients re: reaching the middle market with super-simplified. I think they will see even more small and middle-sized companies looking to increase retention without such support.” Chief Underwriter

PREDICTIVE MODELING Lab Test/Paramedical Measurements Personal Purchase Records Social Media Sites

Open Mortality Scoring System** Lab/Paramed Risk Scoring ExamOne Risk IQ* CRL Smart Score* Heritage Open Mortality Scoring System** * Being Piloted ** In Development

Lab/Paramed Scoring in a Nutshell 10% 10% 80%

The 5 Horsemen of the Lab/Paramed Scoring Apocalypse

“Are the vast majority of the other 80% merely redundant?” “If preferred mortality is already profitable, why shell out $$$$ for this?” “Are the vast majority of the other 80% merely redundant?” “How can I sell standard/rated to a producer whose client meets our preferred criteria?” “How can I avoid hell to pay on reinsurer audits if I gave preferred (or better) rates to applicants who do not satisfy our treaty preferred criteria?” and…

“All ‘normal’ tests are ‘normal,’ but some ‘normal’ tests are ‘less normal’ than other ‘normal’ tests.” (with apologies to George Orwell)

Social Media Site Foraging will be Rampant Will antiselection be rampant as well?

“It would be a HUGE BLUNDER for insurers to use personal purchase records in life underwriting!” - Hank George

R.I.P. Treadmills ECGs M.D. Exams

Already Using Will Soon Rx Records NT-proBNP 78% 22% NT-proBNP 40% 44% Preliminary responses to 2011-12 Requirement Survey and a 25-company Study Group Survey

Resistance is futile; Either lead…or get out of the way! Take-Home Message Resistance is futile; Either lead…or get out of the way!