Life insurance underwriting isn’t just a job – it’s an art, a science and, at times, a puzzle.
To piece together a particularly complex or challenging case, it often makes sense to seek facultative consideration from a reinsurer. Doing so could help underwriters provide a more competitive rating, increase capacity, or establish a partnership to share business exceptions, among other benefits.
Sending a case to reinsurers does not have to be daunting. These four best practices can help underwriters streamline the process and achieve better results:
1. Establish Objectives
Before submitting the case, ask yourself several key questions:
- What capacity do you have, and what do you need from a reinsurer to meet the client’s needs?
- What rating is currently on the table? What rating could be placed?
- Is this a competitive situation? Between different producers? Same producer/different carriers?
- Do you want to match or improve your offer? Or match an offer from another carrier or reinsurer?
Once you have determined what you want to achieve, clearly communicate your objectives to the reinsurer(s).
Start by outlining your company’s underwriting action, including the medical/non-medical rating, capacity offered, reasons for your decision, whether any requirements are outstanding, and whether the client accepted the offer, declined to accept, or asked for additional options.
2. Use a Proven Cover Letter Template
A comprehensive cover letter template can simplify the facultative review process and reduce requests for additional information, which only delay decisions. Here are a few examples of information that can be communicated in an effective cover letter:
- There was a request for additional testing or for an attending physician statement (APS) on a follow-up visit, but no records are available or the testing hasn’t been completed.
- You are unable to obtain additional financial documentation from the client, but you still want to receive an offer based on the information available.
- Your company made an exception on the case. What facts went into the decision? Why does the decision make sense from a business perspective?
- The producer used a unique, advanced marketing concept. Why does it make sense on this case?
3. Leverage the Cover Letter to Convey Specifics
The cover letter can contain a number of elements that clearly state your request, provide a rationale, and highlight evidence that supports the decision. The reinsurance underwriter is more likely to make a favorable decision if he or she understands the target. Hence, it is important to communicate details, including:
- Medical Summary: Briefly describe your thought process and evidence used to make the decision. Is additional medical follow-up being pursued by the proposed insured? Did your medical director provide an opinion on the case? Does the case meet your preferred criteria? If so, what factors preclude preferred rates?
- Financial Summary: Clearly spell out what needs are being addressed with the coverage, what analysis was used to support (or question) the amount requested, and what additional documents could help improve the decision. Did you request a 4506-T form to pursue tax transcripts? Is the client reluctant to provide additional financial documentation? Was full financial information presented up front by the client?
- Producer/Advisor Cover Letter: Which of the facts provided helped to give context to the case? What is your past experience with the producer or agency? Does this case fit within their usual target market? Have they built up credibility based on past submissions?
- Negotiation: Are you willing to share a portion of the risk in order to obtain a more favorable reinsurance decision?
4. Plan for Larger Case Submissions
Large-case submissions should precisely spell out insurance details relating to: in-force, total pending and/or applied-for cover, any replacements (e.g., 1035, absolute assignments), total new coverage being placed, and ultimate total line.
It is also helpful to spell out how you calculated the jumbo limit on the case. The reinsurer will check internal records to reconcile coverage in force, so accuracy is critical. If your plan is to maximize capacity through a multi-stage coordinated submission, include the details. Likewise, if you check for capacity with reinsurers in advance, provide those details, as well.
While a reinsurance underwriter wants to reach a favorable decision, missing, ambiguous, or inconsistent information could generate questions, delay review and limit capacity. A less favorable decision often results. Those underwriters who establish a roadmap for the reinsurer, outlining goals and reasoning in the submission, frequently achieve faster and more favorable decisions.
Like the underwriter at the direct carrier, the reinsurer is trying to piece together the same puzzle – and see the big picture. We are looking for ways to clarify objectives for the underwriting process, and a well-packaged case from the direct underwriter will build credibility and obtain faster, more competitive facultative reinsurance offers.