To Shop or not to Shop Cases in Underwriting?

I have been the witness of many underwriters and Chief Underwriters influencing advisors in not shopping their insurance cases when submitting life applications with multiple insurance companies to get the best deal for the client. When I was at Manulife the word was out to convince advisors to reduce shopping by naming a lead company for underwriting on a case where the lead company do all the underwriting and then share its information with the other insurance companies you selected after its underwriting is completed. As advisor, should you listen to this message or should you only be concerned with the needs of your client? Before you answer this question, I will provide you with some examples to help you make up your mind.

The first case was with an advisor with a big advisor Group in Montreal. The advisor had a client who had been an athlete in the past. I do not remember the exact need of insurance but for our purpose it is not important. Let’s just say the need was for $1 million of insurance. The advisor submitted the case to two companies (at first he wanted to submit only to Industrial but I convinced him to try Manulife) with two apps of $1 million each. With Industrial, the underwriting was quick and the advisor received a standard offer. The advisor took the offer but he only placed $500,000 with Industrial. He then waited for Manulife decision, and waited, and waited and waited… until he called me asking me to get involved and light a fire under the underwriter’s ass. Which I did but we were both shocked when Manulife declined the case. When we asked why, I was able to learn it was because the client had taken performance enhancement drugs while he was an athlete a long time ago. But we pointed these drugs were legal then. But Manulife disagreed and maintained the decision. “So tomorrow,” I said to the underwriter, “if Tylenol is banned and become illegal we are not going to insure any people who have used Tylenol?”

So the advisor went back to Industrial asking that the policy be increased to $1 million but now Industrial scared by Manulife decision refused to increase the coverage from $500,000 to $1 million.

I know a lot of you will blame the advisor and say he should have placed the full $1 million with Industrial and then reduce the coverage to $500,000. Well he did not expect these two different decisions. Second insurance companies do not like issuing multiple contracts. They find it suspicious. It is also costly and they discourage the practice.

However the important lesson here to retain is if the advisor had listened to Manulife and named a lead company for the underwriting and if he had selected Manulife, the result would have probably been that the client would have been declined by Manulife and then this would have influenced Industrial in declining the application also and the client would have been left without any protection; 0$ of insurance.

So the lesson is clear. Always protect the insurability of your client. Never name a lead company for underwriting as you lose how information is shared. You want each insurance company to reach a separate and individual decision. This will always be better for your client.

The second case is not as complicated but I use it to demonstrate a lesson. I had an advisor in the Direct Channel of Manulife who submitted a case and the client got a rating of 200%. He never shopped it to check it this was a fair rating despite the fact I always told the advisors under my management to shop their cases even if Manulife did not like it. But he did not do it and was surprised later when another advisor replaced the policy at standard rating with Canada Life. He called me shocked by what happened wandering how there could be such a difference between underwriting decisions and I told him: “You are wrong in assuming underwriting is a science. It is an art. And as such if the artist underwriter is somewhat structured then the best you can get is an educated guess. If the artist or underwriter is not structured, then you have a Picasso on your hands and their decision can be so surreal that you will be left to ponder its meaning.”

My last case is not a lesson but an anecdote. I worked with a very good advisor Jean-Francois Salvail when I was at Manulife. He had submitted a case and it was going nowhere in underwriting. Months passed by. I think it was the worst case I have seen handled in underwriting. I lost patience and intervene many times but there was always something else. Finally I lost it and Audrey the underwriter told me she was going to make a decision finally. She finally did but it was to be accepted by a certain date. Let’s assume 1st May. The problem was we were the 7th of May. I said to myself this must be a mistake and I called Audrey to explain the problem and she answered this was not a mistake. I tried not to lose my temper explaining to her, Jean-Francois and I did not have a time machine available to go back in time in order to accept the offer. Well she said she could not do anything about this.

Anyway I am still looking for a time machine. Email me if know where there is one. No hurry as this is the amazing part with this type of time warped underwriting; the offer can’t expire. But then again if I go back in time to take the offer on the 1st of May, the offer would not have been made as it was made on the 7th of May. My God this is a time paradox… no even worst it is an underwriting time paradox…Noooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo.

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