Posted on 09 Jun 2010
While the cost of term life insurance is creeping up, the cost of purchasing a permanent life insurance policy from The Hartford is expected to fall this year for at least 25 percent of its new policyholders. That's because The Hartford has developed a new, proprietary underwriting process that substantially improves the company's ability to assess an individual's current health and mortality risk.
The Hartford's chief medical strategist, Dr. Robert Pokorski, estimates that more than half of new policyholders will now qualify for one of the company's two lower-cost "preferred" classifications and that they could save hundreds of dollars on their annual premium compared to the "standard" rate. For example, a 55-year-old male assessed as a preferred risk would save $1,286 on a $500,000 universal life policy.
Dr. Pokorski said the new underwriting process gives The Hartford a competitive advantage by taking a more holistic approach to assessing risk that gives individuals credit for a much wider array of variables. For example, someone being treated for high blood pressure or cholesterol would have been automatically disqualified for the most preferred classification under the old process. That is no longer the case under the new system, as long as they have other factors weighing in their favor.
One of the main innovations of the new system is the use of three age bands, rather than the two that are used by most insurers. This change recognizes the unique risk characteristics of young, middle-aged, and older people, and allows underwriters to offer insurance at a rate that more closely reflects an individual's risk. For example, The Hartford estimates that three in ten older applicants will now qualify for the most favorable preferred rate, which is a three-fold increase compared to the old system.
The new underwriting process also gives an individual credit for being in good physical condition, for getting regular exercise, for a favorable result on imaging tests used to screen for heart disease, and, in the case of older applicants, for having parents who lived to a ripe old age.
"The new underwriting process is a lot more work for our team of physicians and underwriters, but it gives us a much clearer picture of the true risks associated with insuring each individual," Dr. Pokorski said.
The company's underwriting department, which is known in the industry for innovation in other areas, was the first in the nation to offer standard rates on life insurance to women recovering from breast cancer and men who have been successfully treated for prostate cancer.