One of my pet peeves with life insurance companies is that some are too slow and some are way too fast at issuing life insurance policies once approved. And why would I be whining about companies that move that paperwork right out the door? If the policy is approved as applied for it usually doesn’t cause any problems, or at least only a few. When the application is approved other than as applied for, for better or worse, sending the policy to issue at the same time that an email goes out to me letting me know about the approval is presumptuous and a waste of paper.
Let’s pick this apart just a little. Let’s assume first the best case scenario where we applied for and believed the policy would be approved at preferred. Based on the preferred price the client chose the amount and term length to match his budget, say $250,000 of 20 year term. And for the sake of this we’ll say the budget was $50 a month. If he gets approved at preferred plus, better than expected this brings up opportunities, especially if their focus was to get as much as they could for the budget. Now this person has an opportunity to possibly go to a 30 year term or maybe a higher face amount, say $350,000. Insurance companies that are quick on the draw and have a policy issued within minutes of approval are not giving the agent/client relationship a chance to work on behalf of the client. Can it still be changed? Sure, but here’s the problem. Those companies, and I’ll just use Prudential as an example, who are quick to issue on approval are generally notoriously slow to reissue a policy.
Prudential seems to have the ability to approve, print and mail a policy in just a few hours, but if I talk to my client and he now wants a 30 year term for the same price he was quoted for a 20 year term, we may not see that reissued policy for 10-14 days. In the meantime we will get the rocket blasted 20 year term but we can’t use the paperwork from it to put the requested 30 year term in force. The client has to wait, without coverage, for the Pru Redo to work. If the companies could just hold off for even a few hours it would save redo’s, paper, postage, probably trillions of dollars every year.
On the other end of the spectrum, and this happens more frequently with impaired risk life insurance cases, suppose the approved rate is higher than expected. Perhaps the person was a type 2 diabetic who claimed great control with A1c’s always under 7 and no collateral health issues, but on the exam his A1c was 8 and a review of medical records showed he has had some minor issues with neuropathy. Instead of the table 2 quote we had tentatively offered, with the new information the policy is approved at a table 6. We’ll pick on Pru again and say that as soon as it was approved it was printed and mailed. The problem is that this has changed the whole complexion of what the client was expecting. Was he off on the information provided? Yes. Does that mean he is bound to take a policy for $200 a month when he was expecting to pay $100? No.
I’m big on keeping a budget so I work up several options for the client that are around the original $100 a month and highly recommend they put one in force until they can get the other issues under control. When they decide what to do I email Pru and ask them to issue the new option. Again, we’ll have a policy we can’t use in a few days and it will take two weeks to get the new budgetable version. I like to see my client’s policies in force as quickly as possible after approval. They applied because they wanted coverage and a two week delay in issuing is really creating a life insurance risk where there shouldn’t be any.
Bottom line. If these companies would just take a deep breath any time a policy is approved at a rate class different than applied for and give the client and agent a chance to decide on the best course of action, coverage would be in force sooner. I’m not sure there’s much of value here for potential purchasers of life insurance, but I think this goofy system out to be worked out by the companies so they can serve both their clients and agents better. If you have any questions, call or email me directly. My name is Ed Hinerman. Let’s talk.