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Preferred crediting underwriting: Hartford Life Insurance Co.

What It Is

The Hartford's Preferred Crediting initiative takes advantage of current data and medical advances to make the underwriting process easier and more convenient. It includes:

* Elimination of medical exams for all clients and the reduction of EKG requirements.

* Standard rates for clients ages 71 and over who have had coronary artery bypass graft surgery or percutaneous coronary intervention and are otherwise in good health.

* Liberalized underwriting of certain prostate cancers with the ability to qualify for standard rates.

Why It Is Different

The initiative takes a holistic approach to underwriting the individual vs. the applicant's medical characteristics, which equates to an easier underwriting process and lower insurance rates for clients. For example, The Hartford's Preferred Crediting system recognizes clients for positive underwriting factors, such as regular exercise, versus a typical underwriting program where one negative factor, such as high blood pressure, can prevent the client from obtaining a lower rate. Many older clients who have been successfully treated for coronary heart disease may receive standard life insurance rates, lowering prices for about 50% of Americans over age 70 who undergo bypass surgery or angioplasty. Reinforcing its commitment to research and innovation, The Hartford also developed a new position, that of chief medical strategist. The CMS educates advisers and consumers about medical advancements that are improving the longevity, quality of life, and insurability of Americans via training seminars and public speaking events on important issues facing an aging population.

How They Did It

In 2010,The Hartford's underwriting team started a project to review the opportunities to update its views of diabetes and heart disease. This review discovered that some the best medical risks were lost to competitors. The project team decided to address this by developing a new preferred criteria system. This new system eliminated the prior knockout system in favor of a new debit/credit system. It looks at the individual holistically by comparing the interaction of various risk factors while giving credit for new favorable factors, such as regular exercise and cardiac testing. The new system also looks at individuals in three age bands vs. two that most insurers use, which allows the company to offer insurance rates that more closely reflect an individual's risk. It was launched in 2010.

Measuring Success

Hartford estimates that more than 50% of new policyholders will qualify for preferred status. The company estimates a threefold increase in the number of older applicants who will qualify for the most-favorable preferred rate, and a significant number of all applicants will qualify for a lower rate, due to the more holistic approach to assessing risk that gives individuals credit for a much wider array of variables.

Expert Review

"Hartford deserves high credit for their innovative new approach to life underwriting. Hartford breaks the mold here and I tip my hat to the company. What is even more impressive is that Hartford started out by reviewing their approach to diabetes and heart disease underwriting, but were able to open up the entire spectrum of underwriting. This type of open attitude will always lead to innovation. Also, with my belief that true innovation will impact more than just the innovator, The Hartford's effort more than qualifies. Hartford's leadership and innovation in life underwriting is something the entire industry can learn and benefit from.

Life underwriting has changed little if at all for over 50 years. During this time there have been remarkable advances in medicine that have had a dramatic impact on treatment and on the extension of longevity. People are now living decades after suffering from afflictions--heart attack, stroke, cancer and many others-that once were certain death or at least cause for shortened life span. Yet, most companies continue to underwrite life risks as if these advances have not occurred.

Hartford's Preferred Crediting system as opposed to the traditional knockout system of underwriting is a true innovation in life underwriting. I agree and endorse the comment from Hartford that this new system 'is able to help more people obtain life insurance at a lower cost--all at no extra risk to the company.' This is what innovation is all about."


Bob MacDonald, principal in his own consulting firm, CTW, in Minneapolis.
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Title Annotation:INNOVATIORS SHOWCASE: Life Underwriting
Publication:Best's Review
Geographic Code:1U1CT
Date:Jan 1, 2012
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