In North America, life and health risk management is undergoing a dramatic transformation.
The new millennium brought with it great opportunities and unique challenges for our industry. This article will focus on those aspects of opportunity and challenge that have come together to catalyze what can only be described as the ongoing “metamorphosis” of how North American life and health insurers appraise insurability and process new business.
If you have read any or all of my previous essays on the use of prescription drug information in underwriting, you know I am a devout advocate of making informed risk appraisal inferences based on the choice of drugs used by a physician to treat a patient.
There is an important caveat. It has to do with psychiatric pharmacology.
In the last quarter of the twentieth-century, the life insurance industry undertook the first of two radical modifications in its approach to determining insurability. Which, of course, was to distinguish cigarette smokers from non-users of this prevalent nicotine delivery system, in terms of how life insurance was priced, marketed, and underwritten.
Smoker/non-smoker, as it evolved between the late seventies and the early nineties, was warmly received by most customers and, in fact, even applauded by some outside our industry. (A refreshing change, if you will, from how the risk selection process had been perceived previously.)
The second radical innovation was preferred, which expanded upon smoker/non-smoker, employing a bevy of then-innovative factors, measurable with conventional underwriting requirements, to create a one-dimensional profile of the proposed insured, driven largely by physical measurements and laboratory tests.
Simply stated, if one met stated preferred criteria (or, came close and had an assertively tenacious advocate), one was held to be preferred and afforded a lower premium than a mere standard risk.
Think about it…which hospital would you choose with your life on the line? The operative word, of course, is “choose.” To “choose” in this context means having the bucks to make the call…and avoid being involuntarily sent (triaged? sentenced? damned?) to hospital B.
For most of us, the necessary dollars to make an informed choice will only be available if we have critical illness insurance.