The role of the broker in the underwriting process

Dalene Allen, underwriting expert and co-founder of specialist long-term risk cover provider, Altrisk, considers the crucial role of the broker in ensuring that the underwriting process is as smooth and speedy as possible, and that clients get a fair rating.

Underwriting is not fortune telling, nor is it an attempt to predict the future. It is based on calculating odds and averages, and marrying these back to the individual circumstances of the applicant to produce a fair premium. The broker plays a vital role in the risk selection process.

From the very beginning

The underwriting process begins by gathering extensive and accurate information from the prospective client. The broker is the interface between the applicant and the insurer, tasked with completing the application form accurately, gauging the client’s responses, and picking up on subtle cues as to the client’s level of disclosure in the forms.

Much of the information in the application form will form the basis upon which the client is accepted as a client, where after the applicant will also need to undergo the standard medical tests along with any others specifically requested based on what is disclosed in the application.

The application forms the basis upon which an applicant is accepted and the copy of the application witnessed by the broker becomes part of the legal contract between the insurer and the insured. As such, accuracy, thoroughness and honesty when completing the application are essential. The vast majority of rejected claims stem from issues around non-disclosure in the original application.

Honesty is the best policy

The broker needs to record details accurately and honestly and may not leave out information to facilitate a more positive rating. If the broker suspects that the client is not being totally honest, the onus is on the broker to emphasise the repercussions of non-disclosure and the need for full disclosure.

The broker also plays a pivotal role in identifying insurable risk, anti-selection and even fraudulent intent on the part of the client. The ethical conduct of the broker with regard to the underwriting process must be above reproach.

Add a dash of speed

The broker can speed up the underwriting process by ensuring accurate and complete information is provided on the correct application form, and suggesting any necessary additional requirements such as a statement from the applicant’s attending doctor.

Clarifying the options

If the applicant is rated or declined for cover, it's the broker’s role to explain the reasons for the underwriting action and suggest ways of improving the individual’s risk profile, for example, by quitting smoking, or a changing a risky avocation or hobby.

It is rare that an applicant is declined completely for life insurance, but a rated policy with specific exclusions or possibly deferred cover is not. The broker will need to explain the reasons for the rating, as well as the provisions of the underwriting assessment.

With the client’s permission, the broker should discuss the reasons with the underwriting department to provide accurate feedback to the client and to ensure the client gets the right amount of cover.

It’s also important to monitor the client’s changing circumstances going forward as these can have an effect on the risk assessment. For example, a client who possibly received a less favourable rating initially may have made positive lifestyle changes and hence may qualify for a better rate.