Understanding Life Insurance Underwriting & How it Affects You
What is it?
"Underwriting" is a term that is used by insurance companies that dates back hundreds of years to a time when individuals willing to take a risk on sailing ships wrote their names and the percentage of risk they would accept under the description of the ship, the destination, and the cargo. Today, underwriting means basically the same thing - describes the insurance company's process for reviewing and approving, modifying, or rejecting your life insurance application.
An underwriter is a person who evaluates the risks of policy applicants and assigns the "correct" rate classification for SBLI.
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How does it work?
When you apply for a policy, your application goes to SBLI's Underwriting department. The underwriters will review your application, along with the results from your paramedic exam, family history and other relevant information. They will use all of that information to approve, reject, or make adjustments to your application. In some situations, they will counter with another offer that is acceptable to the insurance company.
Different people pay different insurance rates (premiums). The rate you pay is based upon your age, health, and lifestyle.
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What are the steps?
Step 1: A paramedic exam
When you apply for life insurance with SBLI, you'll be required to have a paramedic examination. The results from this examination help our underwriters determine your health status. Within a few days, you'll be contacted by a trained paramedic examiner who will give you specific instructions, such as whether or not you can eat or drink before the exam, and other details. This "paramedic" will come to a place that's convenient for you (your home, your office or other location) to conduct the paramedic examination.
During the exam, the paramedic will:
- Draw blood from your arm;
- Collect a urine sample;
- Determine your height and weight;
- Check your pulse and blood pressure;
- Depending on the amount of coverage you need, possibly complete an EKG (electrocardiogram)
The exact steps of your exam will depend upon your age, your past health history, family history and the amount of insurance that you're applying for.
Step 2: Analysis of the exam results
SBLI will have your blood and urine samples analyzed by one of our approved labs. The analysis is important to determine if additional steps or tests are needed to make an underwriting decision. The underwriter that is assigned to your case will receive these confidential results. You will be given a copy of all of the important disclosure documents that detail your rights and SBLI's privacy policies related to how we handle your health and other information.
Step 3: Gathering information from the MIB Group, Inc. (MIB)
As part of the underwriting process, SBLI will gather information from the MIB Group, Inc. (MIB). The MIB is comprised of a large group of U.S. and Canadian life insurance companies whose primary purpose is to detect and deter fraud that may occur when someone applies for insurance. All insurance companies will send your information to MIB in the same manner as SBLI does. Your information will be retained by MIB and will be part of a confidential database used by all insurance companies – the companies have no choice but to send the information to MIB. As a result, MIB protects insurance companies and helps companies to keep premiums lower than they would without MIB.
Because this is an important consumer issue, customers typically have some questions such as:
What does MIB do?
MIB's primary purpose is to protect Member companies, such as SBLI, from proposed insureds who knowingly or unknowingly leave out important information concerning their insurability on their applications.
When a person applies (completes the application) for an insurance policy, he or she is asked a number of questions that help to classify him/her as an insurance risk. In the case where an applicant either forgets to answer a question correctly, fraudulently completes questions, or knowingly leaves out information on the application; MIB provides an alert to SBLI regarding information that may be relevant in the risk assessment process.
Why is this important?
MIB saves its Member companies an estimated $1 billion annually by enabling them to avoid fraudulent insurance applications and the costs of unexpected claims. These savings are potentially passed down to consumers in the form of lower premiums.
What will SBLI do with this MIB information?
A SBLI underwriter will review your life insurance application information and compare it to what is in your MIB file. The information in your MIB file is used only as an alert. No underwriting decision can be made solely on the basis of the MIB report.
What if I have more questions about MIB?
Please visit their website at www.mib.com for additional information. Or call your SBLI representative to ask them specific questions.
Step 4: Gathering information from your primary physician (and possible other physicians you have utilized)
Based upon the information provided on your application -- as well as the results of your paramedic exam and the information included in the MIB record -- a SBLI underwriter may request additional information from your primary physician. SBLI will ask you to sign a release form that allows SBLI to contact your physician(s) and obtain copies of your medical records. All of your information will be treated as "confidential".
Step 5: Getting a decision
When all of the data is collected, a decision can be made. At the end of the underwriting process, you will be determined to be either:
Approved: Great news! Your life insurance application has been accepted! Your coverage will take effect on the date it was approved by SBLI, subject to the payment of your first premium and your good health on that date.
Modified: Looking good! Your life insurance application will be accepted once you agree to any modification(s) offered by SBLI. We may change the amount of coverage, the premium rate class, or alter some of the benefits, due to a medical condition or hobby.
Declined: We're sorry. Your medical condition, based on your medical history and all of the information gathered by the SBLI underwriter, falls outside the established range of insurability for the SBLI life insurance policy you applied for. Or, the amount of coverage you are requesting is greater than your financial need. SBLI will send you a letter explaining the reasons your request was declined.
Filed Inactive/Postponed: We're sorry. But without all of the information requested, we are unable to make a decision on this case. SBLI will send you a letter telling you what information is outstanding. If you are able to get this information to underwriting in a timely manner we may be able to reopen the case and give you a decision. In some cases, depending on the amount of time that has passed, additional requirements may be needed.
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How long will the process take?
It depends on the amount of information that the SBLI underwriter needs to gather and how quickly SBLI receives the information from outside sources, and how much assistance you can be to gather the data needed to make the decision. Occasionally, SBLI will ask you to request information in hopes that you can get providers to act faster then they have. On average, the process usually takes about a month from start to finish.
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What can I do to help speed up the process?
It helps the SBLI underwriters immensely if your application includes all of the required information. The process moves much more quickly when we have everything we need and we don't have to go back and ask you for additional information. Providing specific doctor information – full name, addresses, specialty, and phone numbers – on all doctors that you have used in the past is particularly helpful. Your correct social security numbers, driver's license, exact height and weight, meeting with the Paramedic as scheduled, and signature on all forms are helpful too.
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Why is my premium rate different than what I thought it would be?
The price you pay for your policy (your premium rate) is based upon many factors, including your rate class and how "risky" your lifestyle is. Once the underwriter determines your rate "class", SBLI calculates your life insurance premium rate.
The information provided on your application, information gathered from your physician and possibly the MIB report, the results of your paramedic exam and other important information, such as your driving record, and personal habits are the basis for determining your life insurance premium rate.
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Whom can I talk to if I have questions or want to know about the status of my application?
Please contact your representative or broker any time during the life insurance application process. We're here to help you get the insurance you and your family need. If you do not remember the agent's name, call SBLI and we can easily secure it for you. You can reach us at:
Monday - Friday 8:00 A.M. through 6:00 P.M. Eastern Time
P. O. Box 4048
Woburn, MA 01888-4048
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