COVID-19, in addition to being a terrible pandemic, has brought a halt to business as usual for most every industry imaginable.  And life underwriting has not been granted an exception.  Among other things, we have seen additional scrutiny placed on certain medical impairments, maximum age and rating limitations imposed, and a reduction in internal retention at some carriers.

However, we are also seeing changes—positive changes—occur in underwriting.  Underwriting progress has been made using data sources to forgo exams and to get coverage approved quickly and non-invasively—which is especially helpful in our current environment.  Also, there is some willingness to use APS information as a substitute for insurance exams.

So what changes are we seeing in underwriting in response to COVID-19?

Less Carrier Appetite for Older Age Applicants 

Several carriers have dropped out of the 70-plus age market, and only a handful remain in the 80-plus market.  There are carriers that remain, however, and those that do typically have rate class limitations — such as standard, or mild ratings in the table 2 to 3 range

In the age 60-plus age group, co-morbid COVID-19 conditions, such as heart disease, diabetes and respiratory impairments are given additional scrutiny.  If these conditions are perceived as mildly rated with some carriers, they will postpone further consideration until after the COVID-19 threat has significantly subsided.

It remains to be seen whether there will be additional age, rating and impairment restrictions.  Much will depend upon the course COVID-19 takes in the future.

Less Carrier Willingness to Internally Retain Risk 

Life companies want to diversify risk as much as possible in the current environment, and to mitigate the financial impact of potential early claims.  

Some carriers have cut back internal retention, especially as it relates to the age 70-plus market.  

If you are only seeking carrier internal retention, it is best to ask your carrier partner what their retention is currently.

Automatic and Jumbo limits continue to remain intact with most carriers for now.  However, carriers and their reinsurers continue to monitor health and mortality related data for possible adjustments.

Reinsurance and Retro Capacity Shrinkage

For reinsurers too, there is a desire to diversify risk as much as possible in the current environment, and to mitigate the financial impact of potential early claims.  Because of this, the ability today to put together large cases has become more restricted.

Facultative capacity with reinsurers and their retrocessionaires has been significantly reduced, in the area of 50% or more with some players.

If you have a large case you are working on that may require facultative reinsurance support, the best course of action is to contact your direct carrier partner(s) to determine current reinsurance capacity.

Age/Amount Underwriting Requirement Elimination/Reduction in Certain Situations 

As a general rule, carriers continue to want routine age/amount exam requirements on all applications.  However, this is an area where, prior to and in the current environment, great carrier progress has been made.  With an eye towards efficiency and speed, these improvements are something to watch as more carrier advancement occurs.

It's all about utilizing existing available data on applicants and combining these with analytics. In effect, various data sources become a substitute for exam requirements, providing a near equivalent mortality result when compared to a traditional insurance exam and lab.  The data sources include electronic health record vendors, such as Human API, Clareto, MIB EHR and others.  They also include medical billing records, lab history obtained from large national reference labs, pharmacy records, motor vehicle results, Transunion data/tools, LexisNexis data/tools, and Milliman data/tools among others.

These underwriting data models are typically referred to as "accelerated underwriting or fluid-less" programs, and offer the opportunity, but not the guarantee , to purchase coverage approved and issued without an insurance exam or lab.   The evolution of these programs has fast-tracked recently in view of social distancing and applicants' desire to forgo insurance exams.

Applicants best suited for accelerated programs are the healthiest of the lot, but these programs are extremely beneficial to all involved when someone qualifies—which happens quite often in the 20 to 40 age ranges.  Maximum face amounts offered have increased for several carriers recently and range upwards to $3 million, and even more with one carrier.

There are also carrier programs available today offering flexibility to substitute certain, or perhaps all, elements of an applicant's existing medical records along with a health questionnaire in place of an insurance exam.  One carrier, John Hancock, extends this opportunity up to $5 million in face amount through age 65, and up to $3 million in face amount for ages up to 70 for all products. There is the possibility for even more coverage, $10 million up to age 60 and $5 million up to age 70 subject to individual case consideration.  Another carrier, Lincoln, extends this opportunity up to age 65 and $20 million in face amount for their IUL and VUL products.  The decision to forgo exam requirements with both these carriers is made on a case by case basis after carrier review of all relevant medical information.  Other carriers may also offer this same opportunity on a case by case basis, but haven't published similar program guidelines.

Some carriers are allowing limited additional coverage to be written based upon insurance exam results completed within the past 2 years, but at times less than "best" rate classes.  In these situations, they will allow coverage to be rewritten at rates the insured may otherwise qualify for should they complete age/amount requirements at a future date.

Additional Issue Requirements

​ Several carriers today require a statement of good health to be signed on delivery, no matter the applicant age, face amount or plan of coverage. Carriers want to be sure no health changes have occurred, all the way to policy delivery.

Post Issue/Inforce Business Follow Up and Underwriting Remains the Same, for Now

For the most part, carriers continue to do the same post-issue follow up as in the past, such as follow up MIB codes they may receive and ordering an occasional post-issue APS or pharmacy check.

Reinstatement underwriting remains similar for many carriers at present, but some are looking more closely at certain ages, typically those who are older, and considering additional screens such as pharmacy checks, phone interviews and COVID related questions.

Some Good News  

​ Without question, COVID-19 has upended the world of life underwriting for the foreseeable future.  But the obstacles that have been created have accelerated the pace of change in the life underwriting process — resulting in more innovation, creativity and efficiency from application to policy delivery. 

In this highly unpredictable environment, the products you provide to your clients have become even more valuable, because first and foremost they provide peace of mind.  

Our mission at Windsor, in the midst of today's rapid changes, is to match you and your clients with the best outcomes available — so that you can continue to deliver that value efficiently and successfully to your clients.