Transcript Underwriting A medical director’s perspective

Underwriting
A medical director’s perspective
Michael L. Moore, MD FACP
Vice President - Chief Medical Director
Nationwide Insurance
What we’ll cover
today
• Underwriting definition and
principles
• Current approaches to
information gathering
• Why surprises happen
• Underwriting variation
• Q&A
Underwriting
• We are in business to sell insurance, NOT turn it away!
• But we must add good cases NOT every case--> why we underwrite
• Life insurance is a different animal than auto, health, or home insurance
• Underwriting according to Life Insurers Fact Book (ACLI)
• Underwriting is the process of classifying applicants for insurance by
identifying such characteristics as age, gender, health,occupation, and
hobbies. People with similar characteristics are grouped together and
charged a premium based on the group’s level of risk.
• Law of Large Numbers
• Standard vs Man off of the Street
• Applicants hold the ultimate trump card in underwriting!
Underwriting
• Keep pushing closer and closer to the limits
• Make underwriting process more convenient:
• making decisions with less information
• lower costs, more convenient
• move processes behind the scene
• leverage technology
Underwriting
• eliminate MD examinations
• eliminate stress tests
• eliminate Chest X-Rays
• Consumer Driven Interview
• Wellness Credits
• use saliva or urine when
possible over blood test
Why do we
underwrite?
• Adverse Selection
• Inequality in the amount of
information between the two
contracting parties
• More concisely:
• placing your bet when the race
has already been run.
QuickTime™ and a
decompressor
are needed to see this picture.
Underwriting
• Surveillance Databases
• Driving records, background checks
• Medical Information Bureau (MIB)
Underwriting
• Medical Information Bureau (MIB)
• Started by medical directors over 100 years ago
• Could be named: Insurance Fraud Prevention Bureau
• collect basic information on life insurance applicants to prevent fraud
• information is coded using a limited number of codes
• forbidden to underwrite on the basis on MIB codes
• Alert that other information may be present
• May ask reporting company for “code details”
• Pharmacy database
• Provides listing of prescription activity
including drug name, date, prescribing
doctor
• Approximately 60% of pharmacy plans
are covered
• Useful in:
• low face amount cases i.e cheap
and easy
• confirm lack of meds admitted on
history
• obtain physician name and contact
information
Despite all of the best efforts the
following still happens!
Why Do Surprises Happen?
“Failure to be candid” crosses all age and socioeconomic groups!
People LIE!!
• The average adult tells 3 lies in the
course of a day
• Four out of ten regularly call in sick to get
a day off of work
• One in ten have lied that a relative died
to get a day off
• A quarter of all job applicants lied on the
application
• March 29,2012 USA Today survey:
• Is it OK to cheat on taxes?
• 5.5% “a little”
• 7.5% “as much as possible”
In Life Insurance
• One in fourteen did not provide correct
information about their health or lifestyle
• A second survey showed 15% lied on life
insurance applications
• 52% of men, 43% of women regularly lie to
employers, friends, family and colleagues
about the state of their health
• Crosses all income levels- Feb 2012
National Academy of Science study showed
the wealthy are even more likely to lie!
What do people lie
about?
• Their weight
• How much they drink
• How much they smoke
• According to industry lab data:
2.5% of “non-smoking” applicants
test positive for nicotine
• Existing health problems
• Driving history
• Dangerous hobbies
What do people lie
about?
• Lies of omission
• Seem more justifiable
• Passive not active
• Protect your loved ones
• Favorite story
Man Faces Charges After
Claiming $20,000 for Fake
Dead Cat
•
On March 27, 2009, Yevgenly Samsonov was reportedly
involved in a minor traffic accident in Tacoma. A driver behind
him was stopped at a traffic light when her foot slipped off the
brake. Reported damage to both vehicles was minor.
•
Samsonov filed a claim that included chiropractic treatment of
soft tissue injuries. The other driver’s insurer, PEMCO, paid him
$3,452, according to the Insurance Commissioner’s office.
•
More than two years later Samsonov sought additional payment
from PEMCO claiming that in addition to the vehicle damage
and medical claim his cat Tom had been in the car and killed in
the accident. The company issued him a check for $50 to
compensate him for the cat, according to Kriedler’s office.
•
Samsonov then told PEMCO that he’d paid $1,000 for the cat,
who’d been like a son to him, and he wanted to be paid $20,000,
reports state. He sent the company two photos he said he’d
taken of his cat.
Man Faces Charges After
Claiming $20,000 for Fake
Dead Cat
A PEMCO claims representative reportedly conducted a
Google search under “Images” and discovered identical
cat images appearing on websites, blogs and Facebook
pages. The two images Samsonov submitted are of two
different cats, and neither belonged to Samsonov, PEMCO
canceled its $50 check and forwarded the case to the
Insurance Commissioner’s anti-fraud unit.
MORAL
It’s better to have a
$50 check in hand
than an internet cat
picture in jail!
What increases chances of misrepresentation?
WSJ 5/26/12
Surprises- Unexpected Lab Results
• Currently experiencing an epidemic of obesity
• A study from Cancer (March 2012) showed an
• increase in esophageal, pancreatic, uterine, and
• kidney cancers --572,000 cases /year
• data since 1985:
Obesity Trends* Among U.S. Adults
BRFSS, 1985
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1986
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1987
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1988
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1989
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1990
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1992
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1993
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1994
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1995
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1996
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1997
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
≥20%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1999
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
≥20%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 2000
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
≥20%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 2001
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
20%–24%
Source: Behavioral Risk Factor Surveillance System, CDC.
≥25%
Obesity Trends* Among U.S. Adults
BRFSS, 2002
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
20%–24%
Source: Behavioral Risk Factor Surveillance System, CDC.
≥25%
Obesity Trends* Among U.S. Adults
BRFSS, 2003
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
20%–24%
Source: Behavioral Risk Factor Surveillance System, CDC.
≥25%
Obesity Trends* Among U.S. Adults
BRFSS, 2004
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
20%–24%
Source: Behavioral Risk Factor Surveillance System, CDC.
≥25%