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“Resolved: Underwriters Must Be Increasingly Prudent In Their …”

I have been part of many panels before many an audience over my four decades in the life and health insurance business. Usually a panelist is constrained from being controversial or opinionated by the ground rules laid down by either the moderator or the organization running the event. Traditionally from my recollections there have been very few meetings of underwriters where the panel is controversial, meaningful fun and leaves the audience with a message to think about. 

In 1994 George Brennan, one of a large crop of Canadian iconic underwriters who played a large role in all associations, put together a great panel (personally speaking and from memories of audience feedback) that really got the juices flowing and left many a valid point to ponder for the audience. George let the four panelists do their own thing and he did not encumber the spoken word or the venom so playfully thrown around.

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Is There Life After Underwriting? ( A History Lesson Perhaps?)

I wrote the following article as it was part of a presentation I did with the great Don Frost at the January 1983 Cholua Seminar. In a recent search of my archives for background material for a book I came across the article. After reading it I felt that today’s underwriters should read it as a history lesson. Today’s leadership should read it to show that some things change for the worse — the lack of meaningful industry statistics on what is issued standard, substandard or declined. The CLHIA to my knowledge has dropped the industry stats for some years leaving an underwriting leader wondering “is my company rating and or declining more than the industry average?” Or then again who cares. 

For the past three years I have heard from many large advisors (large by size of the clientele not their waistline) and MGAs that rated cases are few and declines are many. I have even had a senior underwriting leader say it is irrelevant as the key to today’s underwriting leadership is to get the standard through as quickly as possible. There seems to be less competition be it from insurers or reinsurers for the case that is not quite standard. The last time that complacency was around there were challenges to our right to underwrite! 

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Hate To Be Critical Of One’s Hosts, But …

I was still not convinced 100% by the end of the day. But now lets fill in the information I took away from a day with peers.

Being outside the decision making spectrum of the insurance world it is less likely that I would be invited to an industry leader’s (who services the risk selection domain) infomercial masked behind meals and golf. When asked I said yes not because of the meals or the golf (my golf game needs much remedial effort) but because the infomercial that was to be laid out was intriguing and could perhaps represent the next great turning point in the life and living benefit insurance world. I honestly and without fingers crossed attended even without the two meals and golf. The only down side to the event was that it would take up the whole day from 8:00 Am to 9:00 PM. I also wondered who from the decision making ranks of insurance would give up a whole day away from countless and meaningless meetings to attend an infomercial.

I could write a short thank you and say I enjoyed the day with the usual plaudits embellished with great thanks for the food, camaraderie, golf prices (not for longest drive or nearest pin so lets leave it at that), and anything else that came to mind when writing the Hallmark type thank you. Instead I decided to write an opinion paper on the day. I felt an urge deep within to be constructively critical knowing some would applaud the opinions while others would feel chastised for what was said or not said during the 13 hours. The following is written to constructive and yet it may end any chance of future invites to infomercials regardless of how they are dressed up.

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Financial Underwriting, Why Bother?

When an underwriting historian looks at the subject of financial underwriting, they quickly come to the realization that the conflict/confusion/befuddlement in the different perspectives between underwriter and advisor has existed since days when we could not agree on the value of the inventor of the wheel as a key man! History being so out of vogue today I will skip the horse and buggy, the two great wars, the moon landing and the Cold War so I can jump to 1956. Reading the Transactions of the Society of Actuaries 1956 Volume 8 Number 21 the conclusion by many at the time was “large case mortality was excellent” but still there was conversation about financial underwriting interspersed with concerns of too much accidental death benefit riders, pressure on nonmedical insurance and the creeping concern of antiselection on cheap term products as they entered the product arsenal. Typical concerns of legendary actuaries who ran underwriting and where all real decision making was left to medical doctors. The lay underwriter was yet to be hatched although in the 1950’s there emerged an experiment to try using trained clerks to make risk selection decisions!

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Jumbo Limits Compensating For Terrible Administration

Before most readers were born, and for those that were they were still thinking mathematics was a lucrative career choice, reinsurance played a trivial role in the life insurance industry. In Canada 0.04% (rounded up of course) of all life risk was reinsured in 1969. There was a slightly higher percentage in the USA but my notes and memory failed to enlighten me as I wrote this article. Believe it or not for you youngsters, reinsurance was a follower and minor player in the realm of life insurance risk taking. The icons of the era were insurance company leaders not reinsurance personnel. Reinsurance personnel deferred to the wise counsel of insurance leaders who were at the leading edge of pricing and risk selection. Content to beg or cajole for a mere pittance of the premium pot, the reinsurers fought each other for the privilege of table scraps if we liken the fat purses of insurers to the gluttonous meals served to the emerging obese of today. About the only worthy feature of reinsurers in the “good old days” was their research into impaired lives and the experimental risk taking they fostered for notoriety.

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Two Hymn Books and Two Choir Masters

or Advisors Never Refer To Underwriters As Refulgent (A Geck Maybe but Never Refulgent)

A 2011 opinion on the relationship between advisor and underwriter.

Many many years ago I wrote an article for the now dormant Marketing Options magazine (dearly missed by all while fondly remembered by writers and readers) about the conflict often created by miscommunication or no communication between advisor and underwriter. Thus, to say that the seemingly constant battle to get a life or living benefit insurance application through the mysterious and far from transparent new business department is new has not been around for long. Like most Canadians the advisor has a short memory (just look at how we continue to elect politicians who mere months prior to election screwed us royally) and the underwriter is not paid to remember so they never stored the historical perspective anyway. This chasm of misunderstanding, poor communication and lack of empathy between two integral parts to getting premium in the door to keep the life business going strong is not new but merely in an exaggerated state unseen in intensity in the last 41 years.

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An Actuary, an Underwriter and a Marketer In A Boat

Okay they were not in a boat but rather on a stage in Toronto in front of a couple of hundred underwriters and those that love to hang around underwriters. It was the one part of a two day meeting that I really wanted to see and hear even though the meeting overall conflicted with other travel and client commitments. I thought it and lunch would be worth the day’s admission price. I was able to slide into the back of the room just as the session started and tried to stay as conspicuous as possible by remaining standing.

Regardless of the title they put on their presentation it was to me a chance for the three key disciplines in our business to explain why we are in the position we are today. You could say we are not in great shape or you could boast we are in great shape. It is the old “the glass is half full or the glass is half empty” comparison. I was very curious if the three would meekly state their case and slyly point the finger of blame at the other two or would there be challenging and perhaps even derogatory innuendo thrown freely. I knew the actuary and the underwriter so I did expect a feisty session. Surely someone would address the appalling state of customer service in the industry today as advisor and even customer scratches their head in confusion over the new business service experience. Sorry let me correct that since the service for the “vanilla” case clear of even a facial blemish does slide through unencumbered by restrictive and confusing underwriting  as recounted to me for the past two years by numerous advisors and MGAs.

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Canadian Institute of Actuaries (CIA) AGM 2008

The miscommunication between actuary and underwriter ranks right up there with the disconnect stemming from communication screw ups between advisor and underwriter. This session with the counter point being supplied by a young actuary tried hard to explain that the two sides must talk. We tried to show why they must talk. We tried to show how previous decades of only mythical communication had hurt our industry. Why some actuaries appear to see communicating with underwriters as almost demeaning has never made sense to me. The reluctance of underwriters to stand up for their opinions and their value has become common place regrettably. The session had some fun to it but there was a message buried in the rhetoric. Did anyone leave thinking they would change they way they interact with the expertise within underwriting? I doubt it as they rushed to lunch and or the next session. I wonder if they rushed off to discuss the impending investment meltdown.

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Cooperators’ Agents – Red Deer 2008

I had the good fortune to be asked several times to present to the Cooperators agents/advisors in regional meetings. Each time I thoroughly enjoyed meeting the heart and soul of our business as represented by Cooperators distribution forces. They ask challenging questions and do not settle for casual answers. I was impressed at how eager they were to understand who is taking risk. Who sets the rules for underwriting? Why reinsurers are so dictatorial (a misconception perhaps fuelled by passive risk appraisers). The talk covered everything from “soup to nuts” (you can decide on who were the “nuts”). The passion and loyalty of the distribution teams matched the same passion and loyalty of their new business staff in Regina. Speaking to any part of Cooperators is always valuable to me and the company is one of the few in the world that has solidarity of purpose in all its disciplines. A favourite company for sure.

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ICIRM 2008

Curacao in May is not as great as Curacao in January for a Canuck! This risk management meeting had attendance over 100 and represented various disciplines within claims and underwriting, from leaders to adjudicators. I started my travels with Caribbean adventures as an M&G traveller spreading the gospel of underwriting and reinsurance from the Bahamas to Guyana. The opportunity to return to the region and bring them up to date on reinsurance was a highlight of the year. The world is changed so greatly and I tried to get this audience into an aggressive mood to take on the reinsurers who they felt were being inconsiderate of their current issues. Pushing back against the very people who buy you meals, take you golfing, buy your sports tickets and in general just stroke your soft spot is not easy. IF insurers, especially underwriters do not push back they will be steam rolled (do we even have steam rollers these days?).

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