Producers stew as insurers slow to process life and annuity applications

Frustration is mounting among producers who say insurers are slow to process their life insurance and annuity applications.

Sheryl Moore is president and CEO of Moore Market Intelligence and Wink, Inc. She also has an influential social network and posted about the delay issue last week on LinkedIn. The responses flooded in from irritated producers.

Speculation on the source of the delays ranged from staffing shortages to technology deficiencies to insurers just caught off-guard by a possible sales boom.

"The home offices are likely understaffed, and unable to handle the influx of business," she added via email. "I have seen this in the past, back in 2008, 2009."

Back then, fixed annuity sales boomed in the aftermath of the financial crisis wiped out retirement accounts. The same thing could be happening again. Sales numbers won't be known for a few more weeks, Moore said, but she is expecting they will show very strong sales of multiyear guaranteed annuities (MYGAs).

"Rates have continued to be very competitive, especially relative to CDs," she explained. "That speaks very well for sales of this product line [MYGAs]. Never mind indexed annuities, which should also fare very well for 4Q 2022."

Third-quarter MYGA sales were $27.4 billion, Wink found, up more than 138% when compared to the same period last year. MYGAs have a fixed rate that is guaranteed for more than one year.

Outsourcing issues

Insurers have long outsourced administration services to third-party companies, Moore said. Likewise, many insurers are now outsourcing phone services as well, she added, calling the trend "bananas." It means that someone calling an insurer is going to have an added layer of difficulty reaching the right person.

"Apparently, this is contributing to the long times to issue a case," Moore added.

Bruce Friedland has more than 30 years in the life insurance industry. It is not uncommon for insurers to get caught without enough people power to meet a surging demand, he said.

"They run into servicing challenges and there are often shortfalls in what companies are able to deliver," said Friedland, who left Vantis Life Insurance Co. in 2021 to start his own consulting business.

It can be a challenge for insurers to maintain staffing levels amid so many variables, Friedland said. In addition to sales surges, changing regulations can make the client analysis a lengthy process.

Several insurers contacted for this article declined to comment.

'Even stronger push'

The paperwork crunch was worse at the end of 2022, "when there was an even stronger push towards getting business in and paid for before year-end," said Larry Nisenson of Assured Allies, an insurtech startup that partners with insurers.

Technology integration represents another issue, and potential solution, for insurers. Insurers are not known for quick adoption of anything, but COVID-19 forced at least some tepid embrace of technology. More is needed, Nisenson said.

"Today, consumer expectations for immediacy has infiltrated all of their decisions buying decisions," he said. "These [insurer processing] delays are a clear example of why the industry needs to keep pace with consumer trends to maintain its standing and reputation."

Underwriting is an area insurers can use technology to speed up the process, Nisenson said. Assured Allies developed NeverStop, a wellness program that uses data and predictive modeling. It also has a digital underwriting process that takes 30 minutes to complete and has a 100% guaranteed acceptance.

"There is an increased advantage for products that are completely digital from application submission to policy delivery, since there is no mail delay to increase these already long processing times," Nisenson said.

Bad for clients, too

Shawn Meaike is founder and president of Family First Life, an independent marketing organization specializing in simplified issue life insurance. There are no delays with simplified issue insurance and brokers can submit client applications electronically, he noted.

The delays are real, Meaike said, and the COVID-19 pandemic didn't help.

"On what they call the 'fully underwritten side,' it requires clients to provide blood work, urine analysis, sometimes EKGs, and countless doctors' records that can take months to process," he said. "Since the pandemic, these parameters have become much more difficult to obtain."

Family First also deals in fixed annuities and, if a carrier has a jammed pipeline of business, the company moves on to other carriers in a bid to keep the process moving.

Although rare, there are times when delayed processing can have a tragic outcome.

"My first death claim was a client I had written on a Monday, and he died two days later in a motorcycle accident," Meaike recalled. "It was simplified issue coverage, processed on the spot, and drafted immediately. Needless to say, after his death the claim was paid in full. If I had gone a different route, even back then, it would've taken probably six to eight weeks to process his application and unfortunately would not have had any benefits paid out."

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]. Follow him on Twitter @INNJohnH.

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