A majority of life insurance companies polled as part of a recent survey reported they are utilizing accelerated underwriting for term life insurance.
The study, conducted by global consulting and actuarial firm Milliman, found that 26 of the 34 companies polled were using these accelerated programs for term life insurance, and two additional companies were planning to implement these programs in the future.
The survey highlighted this new trend toward accelerated underwriting for term life insurance. What are the impacts, how does it work, and how does it benefit you?
The Survey’s Results
The Milliman survey polled 34 term life insurance companies to get their input on a wide range of issues regarding these products. The overwhelming majority of them reported utilizing some form of accelerated underwriting program for their term life insurance.
Broken down by distribution of sales for 2020 at these companies, 44.9% were fully underwritten, 36.3% used accelerated underwriting, 18.3% used simplified issue and 0.5% used other approaches to underwriting.
The survey also found that sales of term life insurance plans increased year-over-year during the period of the survey, which covered 2018 through 2020.
Accelerated Underwriting Explained
Accelerated underwriting isn’t a new life insurance plan. Rather, it’s a method that insurance companies use to speed up the process by which they approve and issue new policies.
For accelerated underwriting, a paramedic doesn’t need to visit the home of a life insurance applicant to collect their vital signs, urine and blood. In most cases, the applicant isn’t required to get a letter submitted by their physician that details their medical history. In some cases, the applicant isn’t even required to submit copies of their medical records.
These steps were generally required by all life insurance companies in the past as a way to help them assess the risk level posed by each applicant. It’s a thorough collection of data, and as such, it significantly drew out the approval process.
Approval Time
A typical underwriting process could take up to 12 weeks for most life insurance plans. By contrast, insurance companies that offer accelerated underwriting may be able to have a final decision back within 24 to 48 hours.
Much of the reduced time is due to the fact that medical exams aren’t required. In addition, the application process is completed either over the phone or online, rather than having to complete it on paper and mail it in.
Once you enter or provide your information, the insurance company then pulls other data it needs from credit bureaus, pharmacy databases, motor vehicle departments, the Medical Information Bureau and any other source they need.
How It Differs from Other Plans
Accelerated underwriting differs from both simplified issue and guaranteed issue life insurance plans in important ways.
There isn’t a requirement for a medical examination for a simplified issue plan. However, applicants should expect to pay higher premiums than those who underwent the full underwriting process.
Guaranteed issue, by comparison, also has higher premiums along with a waiting period for the death benefit, which is limited in most cases. At the same time, guaranteed issue life insurance is typically available to everyone, regardless of what their health is.
How the Premiums Compare
Applicants who are approved for accelerated underwriting should expect to pay about the same premium as anyone who undergoes the full underwriting process. Keep in mind that after the initial interview and information being submitted, the insurance company may still require the applicant to go through the full underwriting process, based on the information collected.
Non-medical and guaranteed issue plans have higher premiums because insurance companies assume that people who aren’t in the greatest health are the ones applying for these plans — since they don’t require a medical exam.
Is Accelerated Underwriting for You?
Just because accelerated underwriting is offered to you doesn’t mean you should necessarily go this route. You should check the rates you are offered by the insurance company for this type of plan compared to the rates you’d be offered if you went through the full underwriting process.
If you’re a generally health individual, you actually might benefit from full underwriting—depending on the rates offered by the insurance company you choose
On the flip side, if you would be considered generally riskier as a policyholder, accelerated underwriting could provide significant benefits to you. In addition to a much quicker approval process, you could actually qualify for lower premiums compared to if you went through the full underwriting process.
Work with an Insurance Marketing Organization
As a leading Insurance Marketing Organization (IMO), Good Life Insurance Associates (GLIA) provides a full range of insurance products, back-office services, and tools to support your individual clients’ wants and needs. We provide financial advisors and insurance agents in our network across the country with access to a full range of premium carriers, expert support services, and an industry-leading compensation plan.
Contact us today to learn how we can help you establish and grow your insurance business.