New Study Digs Into Simplified Issue Policy Details

By Cyril Tuohy
InsuranceNewsNet

New research by the actuarial consulting firm Milliman provides a “sharper perspective” into the details of mortality and lapse information surrounding simplified issue insurance products, which have been growing in recent years, the company said.

The Milliman Industry Study of Simplified Issue Mortality (MISSIM) sheds light on the underlying mortality and lapse rates segmented by gender, age, smoking status, target market, distribution channel, policy size, year-of-issue and zip code, the company also said.

“Simplified issue is the way of the future,” said Alvin Klein, in an interview with InsuranceNewsNet. He said there is a need for the industry to issue life policies more quickly and more simply than in the past. “Big companies are moving toward it.” 

Policies written on a “simplified issue” basis stand in contrast to policies issued on a fully underwritten basis, and the MISSIM allows actuaries to drill down into data collected from a total of 15 companies representing 180 simplified issue plans, 5.4 million policy years of exposures, 54,000 total deaths and 848,000 lapses, Milliman said.

The scope of the study covers simplified issue business for life insurance written in the U.S. over an 11-year period from 2000 to 2010. It also includes corporate-owned life insurance (COLI), which is written on high net worth executives.

While different aspects of simplified issue have been around for decades, simplified issue in its current form has only been around since the year 2000, Klein said. 

Simplified issue, which eliminates the need for applicants to undergo expensive medical exams and blood tests, changes many of the actuarial assumptions about mortality, persistency and expenses used in pricing policies, and this latest study offers one of the first in-depth analyses of simplified issue and how these assumptions change. 

Some industry experts believe that within the next 10 years, simplified issue will emerge as the only form of life underwriting as more insurers move toward that model.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at Cyril.Tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.