Dear Agents, Don’t Fear Simplified-Issue Products

ORLANDO -- Carriers are exploring simplified underwriting in greater frequency, according to a new LIMRA study.

But simplified underwriting shouldn’t be viewed as a threat to independent agents, the study authors said. In fact, “every company who sells through independent agents says independent agents were the primary distribution source for simplified issue products,” LIMRA said in a blog post.

All total, 46 percent of simplified issue products sold were routed through the independent agent channel.

LIMRA staff and industry speakers will discuss simplified issue during a session today at the annual Life Insurance Conference.

The bottom line is consumers want an easier process, said Matt Derrick, executive vice president of programs and marketing for Life Happens, citing the LIMRA Insurance Barometer study.

“Our study found that 70 percent of Americans are interested or somewhat interested in a simplified underwriting process,” he said. “It makes the whole process much faster from start to finish.”

Keep It Simple, Silly

As the name suggests, simplified underwriting keeps the application process simple. Companies rely more on the information provided in the application than on data collected from external sources. The simplified issue applications typically ask some health-related questions as well as lifestyle questions.

A variety of life insurance products is offered on the simplified-issue platform, LIMRA said. Forty-one percent of the available simplified issue products fall under the universal life umbrella, 35 percent are whole life and 24 percent are term life products.

“These products use advances in data collection and predictive analytics to obtain better information and analysis of potential policyholders,” LIMRA said.

Some general simplified issue application question are regarding the applicant’s medical history (95 percent), recent hospitalizations (89 percent) and height/weight (82 percent).

LIMRA research discovered there was a broader range of lifestyle questions than health questions. Ninety-one percent include a question regarding drug/alcohol use and 84 percent asked about tobacco use.

If an applicant fails the application process, most companies offer two potential outcomes, LIMRA said. Either the applicant is flagged for follow-up or they are disqualified from simplified issue products. Roughly 75 percent of the simplified-issue products researched had a formal follow-up process in place, and one-third of those products move disqualified applicants into full underwriting, LIMRA said.

The study included individual simplified issue product data collected from 18 participating companies.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].

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