Underwriting Requirement Practices: Always Consider the Big Picture
When life insurers set their underwriting requirement practices, the primary focus has always been on protective value (cost vs. benefit). In many smaller companies lacking the resources to conduct internal studies, the usual approach is to consider the practices of larger carriers and most notably those known to routinely do such studies.
No one can argue that protective value is not a major consideration.
If a prospective requirement fails to demonstrate a sufficient ROI, it would be a poor alternative, independent of other factors. However, when we use protective value in a vacuum, we are at risk for making serious mistakes.
For this reason, all potential requirements must be held at arm’s length and vetted on the basis of factors other than protective that may contraindicate their deployment. We refer to this process as considering the BIG PICTURE.
The BIG PICTURE may show us powerful reasons for either discarding an existing underwriting resource or dodging a bullet by not embracing a novel option. Either way, the BIG PICTURE cannot be dismissed because of its potential for significant consequences.
Let’s consider some examples of how the BIG PICTURE should make us rethink requirements that might otherwise be perceived as solid choices.
CARCINOEMBRYONIC ANTIGEN (CEA) SCREENING
CEA is a tumor marker, mainly linked to colon cancer but also sometimes elevated in other malignancies.
Clinically, CEA is used to follow patients treated for colon carcinoma. Post-intervention elevations have a strong correlation with disease recurrence.
Unlike prostate specific antigen (PSA), CEA is not approved by the FDA for screening and, to our knowledge, is not used on this basis even in persons at high risk for colon cancer based on family history, polyp formation, etc.
A protective value study on CEA screening, published in On the Risk, showed that individuals with more than minimal unexplained CEA elevations have considerable excess mortality risk. Therefore, in a vacuum, this study creates the impression that screening with CEA would be a shrewd choice.
The BIG PICTURE says otherwise.
When elevated NT-proBNP or serum protein are elevated in ostensibly health persons, there are many possible explanations and most would not be seen as life threatening by the applicant or his attending physician.
CEA is different.
When elevated to the extent that we would postpone coverage pending further clinical assessment, the anxiety-riddled specter of serious undiagnosed cancer is inexorably raised.
Anyone who has ever had a scare due to unexpected findings associated with potential cancer understands the tremendous psychological burden this experience confers on the affected individual. This underwriter walked that plank six years ago when multiple noncalcified pulmonary nodules were found incidentally and initially described by the radiologist as “50:50 for metastatic disease!”
At the end of the day, most CEA elevations will turn out to be false-positives in asymptomatic individuals. Therefore, after putting applicants “through the ringer” we will see their fear turn to anger, fueled by their doctor’s accurate statement that “the insurance company never should have done this test in the first place.”
Our industry, hellbent on improving our image and being more customer-centric, doesn’t need to roll these dice.
Two decades ago, an insurer embraced another tumor marked called tumor-associated antigen (TAA) on the same basis: routine age/amount screening. Within a year, the fallout from this ill-advised adventure led to the test being withdrawn.
Sooner or later, companies that screen with other tests contraindicated for screening in a clinical setting (with good reason) will encounter the same problems. Indeed, we are already privy to one case involving a false-positive CEA that came “this close” to litigation against the insurer.
One might argue that there are similarities between CEA and PSA. Both are tumor markers and no doubt an elevated PSA raises the tension level in insurance applicants as well.
However, because PSA screening remains widespread and often encouraged by urologists, there should be no basis for pushback from attending physicians.
Moreover, many of them will tell their patients that it was fortuitous that the problem was identified on the basis of insurance screening.
If an insurer is obsessed with early cancer claims, there are other ways of tackling this problem.
Screening elders with hemoglobin would also lead to the discovery of unsuspected colorectal neoplasia, while insulating us against criticism because (a) hemoglobin screening is routine clinically and (b) there are many causes for anemia other than occult cancer.
And hemoglobin should be less costly than CEA, allowing us to screen a larger subset of applicants for the same outlay.
BIG PICTURE: despite its cost/benefit allure, CEA screening will be denounced by applicants’ physicians, induce great anxiety during the agonizing interval until it is clinically evaluated and put us at risk for downstream consequences.
A small (but resolute) subset of life insurers screen applicants’ urine to detect the primary metabolite of Cannabis sativa (marijuana).
At least one of them asserts that this confers sufficient protective value for excess mortality. The study underpinning this statement is unpublished and thus exempt from scrutiny.
After carefully researching the subject of health consequences linked to marijuana use by adults, I wrote an article published in the June 2012 issue of On the Risk.
That article showed that there is no evidence whatsoever for presuming that indulging in this drug confers excess mortality risk.
Indeed, this presumption has been laid to rest by the only two published studies I was able to track down!
Similarly, pot smoking per se is not a risk factor for COPD, psychiatric disorders, cardiovascular disease or any other prevalent medical illness. There is some increased chance of driving mishaps but to no greater degree than that associated with driving in the wake of what most insurers would consider temperate alcohol intake.
If these findings are accurate, what could explain the putative excess risk attributed to testing positive for marijuana?
It is likely that a positive marijuana test in adult insurance seekers is little more than a red herring. The good money says any excess mortality here is due to comorbid considerations not adequately considered before coming to the flawed conclusion that marijuana is the culprit.
The argument that acquiring marijuana necessitates dealing with “criminal elements” rings hollow to anyone with any knowledge of the subject.
The prevalent practice of underwriting non-tobacco using marijuana smokers as the equivalent of cigarette consumption has now been rendered indefensible.
Do we really want to screen for a substance that, if present, confirms nothing more than indulging in a safer recreational substance option than alcohol consumption?
Don’t be surprised if the net effect of marijuana testing is to send healthy Cannibis users to non-screening carriers, where they will be compelled by their circumstances to lie to be treated fairly!
BIG PICTURE: if screening tells us nothing more than the fact that an applicant is using a substance with no independent mortality implications, wouldn’t those funds be better spent elsewhere? This must be the perception of the vast majority of insurers given the low prevalence of Cannabis screening.
The use of exercise ECGs has decreased enormously in recent years by virtue of setting progressively higher screening thresholds. Nevertheless, the practice persists among the majority of life insurers.
Clearly, there is abundant protective value inherent in treadmill testing.
This point is not in dispute…simply because it doesn’t matter.
The reasons why we should finally put an end to this practice are all imposing BIG PICTURE concerns.
It is widely accepted that senior life insurance management has three dominant priorities where underwriting is concerned:
- Do it faster
- Do it cheaper
- Do it in a customer-friendly manner
Like no other requirement in our armamentarium, save for the nearly extinct chest x-ray abomination, the exercise ECG blatantly violates all three of these mandates:
- It is slow
- It dwarfs all other assets in terms of cost
- It is the antithesis of customer-friendly
While it may the argued that there was a time when exercise ECGs were needed because their payoff could not be matched by any alternative, that time has passed with the advent of NT-proBNP.
Fact is an insurer should be able to screen at least 38 applicants with NT-proBNP for the cost of a single treadmill test!
In a recent survey, the majority of chief underwriters agreed that exercise ECG screening would pass into the mists of history within 5 years. With a little help from our friends in reinsurance, perhaps we can sound the death knell of this egregious test in less than 60 months!
BIG PICTURE: the exercise ECG flies in the face of our mission (as conceived by the people who pay our salaries) and it no longer has a place in the financial services industry.
PREDICTIVE MODELING WITH PERSONAL PURCHASE RECORDS
It is stipulated by some that insurers should ravage their current objective screening practices in favor of relying upon “the mother” of all subjective alternatives: inferences based on how applicants allocate their disposable income.
Suppose, for the sake of argument, that this is true.
Does this make it prudent to go forward with this practice?
To its credit, this industry has renounced the use of race/ethnicity, religious affiliation, zip codes and sexual orientation as criteria for assessing risk.
These factors were not proscribed because there was no statistical basis for embracing them. Rather, they were shunned because they are, by any reckoning, grossly inappropriate.
Now some would have us believe that it is within rational tolerances to make dubious insurability inferences based on personal purchases.
Anyone with common sense would have to be disappointed if this practice did not trigger outrage on the part of producers, insurance seekers and industry regulators alike.
Up until now, we have wisely recognized boundaries beyond which we dare no go.
Hopefully we have not become insensate to the need for boundaries.
BIG PICTURE: use of personal purchase records in underwriting is another boundary we are obliged to recognize and sidestep.
Undoubtedly, some of you that have read this essay will take exception to one or more of these BIG PICTURE conclusions.
Robust discussion based on the airing of all points of view is the best way to address these (and countless other) issues. Unfortunately, we are accorded far too few opportunities to engage in public discourse of this nature.
If you see things differently (and are game to put your name to your views), you are welcome to share your thoughts in the certain knowledge that all (appropriately articulated) opposing viewpoints will be published here for the benefit of our 2,500+ registered members.