Comprehensive Underwriting Audits
Underwriting audits are comprehensive and thorough and add value to the portfolio by identifying problematic assets prior to policy purchase. There are many reasons why a policy may present an above average risk, from document and data irregularities to missing documents to careless reporting of incorrect information to the carrier. If the risk can be mitigated, this adds to the long-term value of the assets; if not, avoiding these risky assets may reduce long-term costs.
- A broker submitted a life expectancy report that had a notation on it stating the LE company received additional medical records and changed their multiplier from 200% to 400%. Upon examination of the new facts, it was noted that 1) a family member had contacted the doctor to report that the insured was not taking medications; 2) a diagnosis of a stroke was reported by the insured on a medical history form but there were no medical records substantiating this fact; 3) there was a single reference in the records to dementia and sick sinus syndrome with no test results, notes, etc.; and 4) the insured had refused her doctor’s advice to go to the hospital or have additional tests completed for evaluation of reported dizziness and shortness of breath. Because these four instances involved undocumented information, the shift to the higher mortality table was disregarded in pricing the life insurance policy and overbidding was avoided.
- Two life expectancy reports issued ten days apart were received for the same insured. The number of months dropped from 161 to 114 months, almost a 4 year difference in life expectancy. Upon review of the medical records and the two reports, it was discovered that the insured had provided his physician with two additional pieces of information: 1) he had resumed smoking, having only quit for a short period that appeared to coincide with the issue of the policy; and 2) although diabetic, he had ceased following his doctor’s advice regarding medication and had decided to design his own medical program. Because the insured had returned to the doctor specifically to add in negative information which was then submitted to the LE company, the reliability of the second, shorter LE was called into question. As the case was not viable at the first LE of 161 months, which was probably more indicative of the insured’s true health, it was decided the policy should not be purchased.