Don't Take Shortcuts With Risk.

Substituting other body fluids for blood may produce faster test results, but it eliminates information necessary for accurate mortality risk assessment.

Underwriting is like spinning plates in the air on "The Ed Sullivan Show." (Bear with me if you were born after the mid-'60s).

One plate holds convenience for the customer. Another plate holds efficient response to the agent. Yet another plate holds responsible mortality risk management--that is, profitability--for your company. The key to keeping all the plates spinning at the same time is speed, agility and know-how.

Of course, the tendency is to take shortcuts wherever possible to keep all the plates spinning as fast as possible. But when you begin to ignore one, gravity takes over to create a grave situation.

The drive for faster, cheaper underwriting, HIV detection and happier consumers has distracted insurers from the mortality risk-management plate with the temptation to substitute oral fluids for blood. Doing so is acceptable, but diligence pays off in the end.

On the surface, it seems that oral fluid might provide a level of risk protection similar to that of blood. But AIDS has brought about a discontinuity that changed the way insurance products are offered. Before the AIDS epidemic, blood testing and paramedical exams were thought to provide unnecessary information and cause needless expense, particularly for younger applicants. When the AIDS epidemic hit, the Food and Drug Administration approved a blood-test protocol for the detection of HIV antibodies. It was the only definitive method of detection. Now, tests exist that detect the HIV status of an individual via saliva or urine.

What some are forgetting is that during blood's evolution as a source of data, other information obtained through blood has led to an entirely new market--the preferred market. This is a whole new world of products that oral fluids alone cannot currently support.

If an underwriter's goal is to obtain the most information possible without overspending for additional information, consider the marginal cost of blood over oral fluids. After incurring the time and expense of verifying HIV status, it costs little more for further analysis of the blood, urine and vital signs, unless the agent is employed to do the collection.

Numerous alternative underwriting requirements have been attempted as surrogates for conventional tests. The motor vehicle report, for example, may offer some additional useful information to predict the likelihood of violent death at younger ages. But although violent deaths represent the most common cause of death in the first five policy durations among males underwritten in their 30s, they do not represent the majority. Roughly 66% of deaths under the age of 40 can be attributed to nonviolent causes. Another issue is motor vehicle report interpretation. It is common for the information about the frequency and seriousness of the violations that occurred to be incomplete or erroneous.

On the other hand, there has been tremendous progress in the refinement of the personal history interview process. This approach asks the prospective insured a host of scripted questions. In an electronic underwriting format, when a positive response is given, a series of drop-down questions appear to probe for more specific details on the response. This approach will have widespread use in the years to come. Yet as with any means that uses the prospective insured as the primary source of information--a source with a vested interest in the outcome--something is lost. In this case, that something is the sentinel effect from not requiring an exam and/or body fluid collection by a health professional.

Again, the real cost savings come when the agent collects the specimen, either saliva or urine, personally, even though the possibility of specimen substitution exists with this method of collection.

One final point to bear in mind: Most companies currently offer preferred-risk premium rates for amounts of $100,000 and up. They rely heavily upon blood-test results and findings from a paramedical exam to distinguish the favorable from the less favorable risks within the traditional standard class. Companies always have been able to choose from a wide range of opportunities to attract certain markets and meet the needs of potential customers in whatever ways that are deemed attractive. The premium that is charged must reflect the savings from reduced underwriting costs, and it must cover the loss of the sentinel effect, anti-selection and, ultimately, increased mortality.

Barry A. Wilkinson, a Best's Review columnist, is vice president and chief executive underwriting officer at Lincoln Re, Fort Wayne, Ind.