Just read through a lot of this thread. As OP pointed out, getting life insurance is a long, tedious process. There are several companies getting into the accelerated UW space, and I’d strongly recommend looking into those if you’re looking to get a term policy, specifically if you’ve had a physical with your blood drawn in the last year. I used a company called Ladder, whose policies are backed by Fidelity. I filled out the application, which took like 5 minutes, and my application was accelerated and I got approved right there on the spot, using my medical info from my recent physical, and had my policy immediately. Was super neat and the rate I got was pretty good. I tried a few others with a similar process, which were slightly more tedious, but all were 100% far better than buying life insurance through the traditional, old school method that takes like a month to get a policy.
There’s certainly a tradeoff between price, product features, and time to policy issue. The difference between ladder and the OP’s broker is that ladder gives you one product with a focus on immediacy. The broker should be giving you the best-featured product, at the lowest price (with a common tradeoff of taking longer in underwriting) and that’s not what ladder’s doing. To compound this, the online offerings are often not just accelerated underwriting, they’re simplified underwriting. And that brings other potential problems.
The other problem with online is the lack of interest in education on the complexities of life insurance. Consumers treat the purchase like a check box - click and buy, done.
Those are what the online space in life isurance (including myself) are struggling with. Do you sell overpriced, limited feature insurance that people can click and buy? or do you sell the ‘best’ coverage for each consumer, at the cost of many lost sales?
I just saw a bit of a pissing match on linkedin over this. A canadian startup with (IMO) very shaky ethics just brought out a white labelled term product that doesn’t have conversion. Agents are wild. Personally, I would never sell a term policy without conversion. People don’t care about conversion, until they care, then they care ALOT. But online, nobody knows a thing about conversion.
In terms of dealing with these competing interests online, I’m trying to stay at the ‘best priced, best featured’ insurance, but it’s not easy. I’m pounding hard on non-traditional (even for online) distribution methods to get around consumers tendency towards checking the box.
Yeah, they theory behind simplified underwriting is that the insurer’s cost savings in issuing the policy more than covers the inevitable slippage in underwriting.
Whether that theory will play out in reality is a very different question. But if it’s priced assuming that this will be the reality, then it will be the insurer left holding the bag at the end of the day, not you. As long as they’re stable / secure enough to not go out of business from possibly underpricing the coverage then buying such a policy is probably fine.
Some of them are simplified issue, but the AUW companies are not that. From my perspective, I wasn’t looking for a ton of features. It was simple and easy, but I’m also very healthy and don’t have any underlying medical conditions at any point in my life, so it was an easy acceleration for me. If there was something in my history, I know they can order labs or more simpler things like spit kits, etc. Now, if I decided I wanted to look into more complex life policies, then sure, I would go speak to an agent and shop around. But I have a lot of kids and was underinsured… and now I’m not, so it was a win for me.
Is there something equivalent to a minimum loss ratio on term life? Or alternatively what kind of profit load is included in the premium?
Could you clarify?
I consider it simplified issue if the insurer is not collecting blood & urine when they issue the policy, FWIW.
another reason for young actuaries to consider the CAS
IFYP
(Actually it’s not the underwriters either. It’s usually like an LPN or similar.)
The practice that I’ve seen in Canada is that while there may be cost savings on issue, all hell breaks loose at claim time. Substantially increased claims, and claims denial. Bad for companies, and bad for consumers. As one agent said, the best business an insurance company can write are policies where they’re not on the hook for the claim. And some of the biggest players in Canada in this market are absolutely denying claims at far higher numbers than a typically underwritten policy.
Based on that, and a variety of other things, I’m very much of the opinion that most online policies today are very detrimental to the consumer.
I’ve hope for the accelerated underwriting and closer to instant issue policies, because if they can fully underwrite via computer, then that’s one huge hurdle out of the way. I don’t know whether those systems are there yet, but I suspect not. they’ll probably not ever get to the level of an advanced underwriter with experience, but I suppose they can get close enough that if the odd case slips through that it won’t impact the block noticeably.
I’ll provide two counter examples (and state that counter examples are common even if these two are specific). One, I had an underwriter tell me that frequent travel to Europe plus a trespassing charge equalled a decline. Why? Because people who do base jumping do so in Europe, and when caught, they get hit with a trespassing charge. Does an automated underwriter pick that up? I don’t know.
Second counter example, my brother bought insurance from a simplified issue/online place (this is an example of how consumers can struggle with going through the questions themselves) with me assisting. The question was, have you ever been told to stop drinking due to alcohol abuse? Now, he’d been told to stop drinking, but was it due to alcohol abuse? We discussed it at length, and concluded that he’d been told to stop drinking - but NOT due to alcohol abuse. He was claiming some sort of hereditary issue that inclined him towards liver issues. FWIW, I’ve worked with thousands of policies and had an underwriter describe me as someone who does more substandard cases in a week than most agents do in their career, so I wasn’t new to this. My opinion, based on what he said, answer the question no and take the policy. The underwriter raised questions. At that point I’m not able to make the determination, and made him go to his doctor with the question. The doctor said ‘yes’. Which was counter to both what I interpreted and my brother. End result - he didn’t qualify. He got another policy.
Without me forcing him to the doctor, he’d have taken a policy that would never have paid out. Unlike in the US, in Canada that type of misstatement would be grounds for a claims denial at any time - even after the two year incontestibility period.
People who buy policies online right now are taking on risk they wouldn’t have with an experienced agent, and IMO companies may be taking on risk that they are not familiar with (and online insurance consumers are absolutely not the same risk class as either in-person or substandard). I think we’ll get there, but right now I feel there’s lots of risks being ignored.
Looks like I could buy $1m supplemental coverage for $25/mo through work so thinking of doing that…
Nope, no minimum loss ratio for Life Insurance. That’s a health and P&C insurance thing. Life insurance has no such constraint.
typical profit load might be 8-12% of premium - it will vary by product and company
Oh OK 8-12% isn’t so bad
That’s an old definition. AUW has come a long way using other data (i.e Rx data bases, MVR records)
I believe that for SI insurance that it’s just the applicant being asked minimal questions where the truthfulness of the answers aren’t even really verified unless a claim occurs during the contestability period. With the AUW, sure, they aren’t having an LPN physically come to your house to take your blood, height/weight, etc because you already had that information taken when you were at the doctor in the last 12 months. You give them permission to pull your medical data from medical databases and they validate your application that way. I believe only a certain portion actually is accelerated. The rest may end up getting labwork or EKG or whatever is needed. That does not happen with SI. And the rates are much more comparable to FUW than SI (which is more expensive and typically for lower face amounts), but as others have mentioned, there is likely some load added to account for mortality slippage, however, when I got my policy a couple of years ago, it was competitive with traditional FUW policies. 
Exactly. The main difference between FUW and AUW is who is physically taking the measurements, the people the company sends out to do it or your own doctor’s office? All of the data being used in decision making is the same.
Simplified issue generally means no real underwriting. It’s a series of yes no questions that the consumer either qualifies for, or not.
A fully functional underwritten policy consists of full medical underwriting plus, sometimes, blood and urine. Not requiring blood and urine doesn’t change it from an underwritten policy to simplified issue. Confusing.
No medical terminology is even more confusing. It used to mean no medical, no underwriting, no questions, everyone qualified. Then the simplified issue people started calling their policies no med. And now I’ve seen people try and blur the line between a fully underwritten policy without blood and urine, and ‘no med’ policies.
It’s a mess.
And if you think consumers aren’t smart enough to anti select, here’s an example.
Simplified and instant issue policies used to exclude deaths in the first two years. They’d just return premiums, at a good interest rate.
So consumers who were dying would buy a policy not for the death benefit, but because they’d get a really good rate of return on they’re money before they died.
Some companies had to reduce that rate of return for that reason. And this was recently, like last 5 years iirc. I’m guessing that wasn’t priced in.
The example of your brother is a scary example of what could go wrong with pure online insurance. As I’m sure you’re aware there are many companies trying to accelerate the issuance of a life policy with the involvement of an agent and well as AUW. The seems like a good direction for the industry. As you point out, a life insurance application/contract with all of its many features often needs an agent’s involvement to explain the process, pitfalls and features. The AUW process probably isn’t as rigorous as an experienced underwriter (yet), but it does a great job of reducing the time between application and issue without the hassle of a para-med examination and when priced correctly, offers the consumers a reasonable option somewhere between FUW and SI.
This does not surprise me in the slightest. I was quite skeptical about the claim that the underwriting cost savings would more than cover the increased claim costs.
Trust but verify just seems prudent in life insurance. Am I the only one who remembers the fiasco when Heath Ledger lied on a life insurance app and then died shortly after?
In your brother’s case, wouldn’t he have to die from some alcohol related illness in order for the misrepresentation to be material? I mean, if he was killed by an errant maple syrup truck (and was not drunk at the time) I don’t see how they could rescind the policy. Maybe this a difference between US and Canadian law or the difference between health and life products. I used to do quite a bit of analysis for our automated UW for a health product pre-ACA and we would not have been able to avoid this type of claim. If he died from cirrhosis or drunk driving, then I get it.