Do you know the recipe of secret sauce underwriting? If not, don't be alarmed. After all, it's different everywhere.
Let me explain....
If you have ever watched a crime drama on television, you have heard over and over that eye witnesses are unreliable. The rationale for this belief is that two people who witness an event recall it in vastly different ways. Well, the underwriting for life insurance lab results can be somewhat similar.This is just one part of what is known as "secret sauce underwriting".
Because life insurance carriers all have different appetites for specific risks, your lab results for blood pressure, cholesterol, liver enzymes and more, will be viewed differently by the insurers. You know, that bit about beauty being in the eye of the beholder.
The Preferred Best Project will try and give the range of existing carrier interpretations based on experience and the information available. However, the more conditions involved, the thicker the secret sauce underwriting becomes.
If you have read about Background of the “Preferred Plus” project or the Starting Point , you know that the primary lab results measured will be:
Build (Height & Weight)
Lipids (HDL & LDL Cholesterol, Ratio & Triglycerides)
Blood Sugar (HgA1C)
Kidney Function (Creatine & BUN)
Liver Function (AST,ALT,GGT)
To learn more about interpreting these tests click here.
The first three items on this list (build, blood pressure & lipids) will have some variance between carriers and is information that is available with some digging. The last three items are items held closer to the vest by insurers. These items (particularly in combination) are thought be the “secret sauce” of a carriers underwriting guidelines.
Not quite. It's actually the carrier underwriting departments that use the "secret sauce underwriting" formula to interpret the life insurance labs.
In the life insurance underwriting world, the term “secret sauce underwriting” refers to the unpublished guidelines of the carrier. As we have said, the “sauce is particularly thick in the case of conflated or multiple risks associated with on applicant.
For instance by themselves, blood pressure that requires medication for control , cholesterol that requires medication and avocation as a commercial pilot, would not eliminate your chance at a "preferred plus" rating. however, if the applicant faces all three risks, the chances of the highest rating are not at all likely.
Because the guideline information for the final three tests of the Preferred Plus Project (blood sugar, kidney & liver function) are not publicly available the project will rely on the re-insurance guidelines.
The life insurance companies that sell retail policies do not want to take all the risk associated with the policy. The way they mitigate this risk (and free up capital to take on new risk) is to buy re-insurance from the major re-insurers (SwissRe, MunichRe, GenRe) .
The practical affect of this is that insurance companies tend to write their guidelines to match the re-insurers. For the carrier, this strategy ensures the ability to off load risk immediately or in the future. For the applicant, it usually means less wiggle room.
In cases where it is known that the carriers deviate from the reinsurance standard, the known standard will be used. In cases where the carrier is known to use a specific re-insurer, that re-insurer standard will be used. If neither of these scenarios plays out an average of the three major re-insurer standards will be used.
While I hope that this project is helpful to all readers, I strongly encourage anyone who has an insurance need NOW to get insurance NOW. You can always have it re-written for a better premium in the future when your health improves. however, being that tomorrow is guaranteed to nobody, don’t leave things to chance.
Thank you for checking out the Preferred Best Project explanation of "secret sauce underwriting". Should you have any questions about the project or life insurance please feel free to give us a call or contact us.
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Jim Tobin is the owner of Life Insurance Help Desk, a Fairfield County, CT. life insurance agency. You can find him on LinkedIn and Facebook. Over the past 10 years, Jim has used his CFP-financial planning designation to help individuals with their life insurance needs. In addition to working with life insurance clients, Jim teaches ESL classes in his spare time. He resides with his beautiful wife Nicole and the 3 cats that rule their lives..
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