Is the Life Insurance Exam on The Way Out?

Giving blood samples, getting your blood pressure checked, and providing a urine sample after stepping on the scale are often some of the most unavoidable and frustrating parts of having to get life insurance. In fact, many of your clients may have decided not to move forward with the policy because they were concerned about going through the medical exam. Your clients may find the exam the worst part of the process, but there's good news for those who may not have to rely on it much longer.

In many of these cases, the clients were perfectly healthy or only had minor medical issues. However, the inconvenience of having to go through a medical exam deterred them for getting the life insurance they needed that would help to protect their family well into the future.

The medical exam has long been a part of the life insurance process because insurance companies are able to learn a lot of information about applicants, whether it's from the motor vehicle record or from the medicines clients take, to use the algorithms in their company to predict your life expectancy.

As these systems get even more intelligent and more data becomes available to these companies, insurers may be able to issue more policies without requiring any medical exams.

According to vice president and general manager of life insurance in the analytics company LexisNexis Risk Solutions, Elliot Wallace, the next ten years should see the dissipation of the medical exam for life insurance for most people.

How It Affects Your Clients as Applicants

Some companies are already using a process known as accelerated underwriting. This makes it easier for healthy and younger applicants to acquire up to $1 million in term life insurance and get a policy within minutes of initiating their application online. This means no more medical exam and the hassle of having to schedule it or have someone come to your home. This is how the process works:

  • The applicant provides information about their family health history and their own health issues.
  • The company identifies available data such as the prescription drug history, the motor vehicle record, and information provided on various health and life insurance applications, both.

The automated system uses internal algorithms to decide whether or not the applicant qualifies for the policy and at what price. This doesn’t mean, however, that medical exams will be eliminated for all of your clients. If a client has a health condition like high blood pressure or something else, they will probably be required to still take a medical exam. These policies are distinct from the no medical exam life insurance policies that have been around for many years. Those policies can often be quite expensive because they are used by individuals who have health conditions that may not qualify under traditional life insurance, and they offer very low face amounts. Insurance companies must offer less coverage and charge more because little or no medical information is used to approve the applicant.

Transparency Issues

Your clients may be concerned about how insurance companies are mining data gathered from all of these different sources. Some legislators and advocates in the industry are arguing that insurance should be priced in a transparent fashion rather than a decision-making model managed by internal algorithms that consumers don't understand. Insurance companies see a major benefit in eliminating these medical exams. First of all, the companies have to pay for them and relying on them less opens up the opportunity to reduce costs while also selling policies to more people who would have been hesitant about taking a medical exam.

These days, many people are less comfortable even meeting with their life insurance agent in person and prefer to do business online or over the phone. This makes those same candidates even less likely to follow through with the medical exam. If an exam is required, the waiting period to get a life insurance policy is usually a few weeks.

However, if there are delays on the insurance companies end or in scheduling the medical exam, this can be even longer. The longer that this process takes as any insurance agent can attest, the less likely that the applicant will follow through and purchase the policy.

According to the industry trade and research group LIMRA, approximately 48% of households across the United States don't have appropriate life insurance. The coverage gap in each household is around $200,000, meaning that your clients' families could be significantly affected by a lack of appropriate insurance. The insurance industry has typically been relatively slow to adapt to technological advances.

While it is relatively easy to apply for car insurance online or even initiate an application in the health insurance marketplace, it has been difficult for the life insurance industry to adapt to doing business online. However, this elimination of medical exams for most applicants in future years will make it much easier for applicants to find a policy that most fits their needs and to address the coverage gap prominent across the United States. Buying life insurance will become an even faster proposition since the life insurance companies will already have some personal information in a digital format. Accelerated underwriting will also be used for more of these policies, making it easier for clients to qualify and receive a policy quickly.