What is Your Application Cycle Time and What is it Costing You?

Have you ever contemplated the cost of how long a life insurance application takes to go through the underwriting process? Let’s consider the average life insurance sale.

You have talked to your client Jim about life insurance for several years. He has finally decided it is time to take a look at life insurance and the cost to protect his growing family. Jim is 47 years old and in good shape. You and Jim determine that $500,000 of coverage is about right for him and talk about the options available. You prepare illustrations and show Jim a 20 year level premium term with good conversion options at a premium of $179.61 monthly. Jim and his wife Jan agree that the premium is affordable and the coverage is important and they would like to proceed. You make an appointment and take the application. So far you have spent about two hours working with Jim.

The application is submitted to the company and the underwriting process begins!

During the underwriting process you have to get involved several times to gather missing information, verify answers, let Jim know how the process is going, and pushing the carrier to get the process done faster! All in all you spend another hour working directly on Jim’s case.

After 30 days you get word that Jim is approved as applied for and you wait about 5 more days to get the actual policy. You make an appointment to meet with Jim to deliver the policy and collect the final delivery requirements which takes you another hour.  You submit the delivery requirements to the carrier and get paid on the case the following week!

You just spent 4 hours of actual work on the case and it took about 6 weeks for you to get paid! It’s easy to figure what you earned for the 4 hours with a premium of $179.61.  At a 90% commission you are making $161.65 a month or $1,939.79 annually. Divide that by 4 and you got paid $484.94 per hour.  But is that really a true accounting? You had to wait 6 weeks to get paid!

What if you had shown Jim a 20 year level term that did not require a medical exam and you let the carrier take the application for you?  For $180.60 monthly, you could have offered a 20 year level premium term to Jim that did not require a medical exam.  The process would have gone like this:

• You have your initial discussion with Jim and his wife, prepare the illustration which you present, and they agree to apply for the coverage. You spend about 2 hours (side note – this actually could have all been done over the phone as well, less driving time).
• You take the initial “Drop Ticket” application and explain to Jim that the carrier will be calling him to conduct the interview and take the full application over the phone. You let him know about how long the call will take and what information to have prepared in order to answer all of the questions. This takes you about 15 minutes.
• The carrier contacts Jim and takes the application within about 48 hours or a time specified by Jim.
• The application is processed by the carrier. They review Jim’s history electronically via his Medical Information Bureau report, pharmaceutical screening, driving record, and credit history.
• His application is approved 4 days after the phone interview, preferred as applied for.
• The policy is sent electronically directly to Jim with the delivery instructions.
• You are paid the following week.

Jim is thrilled that the process was so quick and easy and they decide to take out a policy on Jan as well!!

Now what did you make on Jim’s case? You spent 2 hours and 15 minutes with Jim.   His monthly premium was $180.60 (he is willing to pay the extra 99 cents a month to avoid having to do a medical exam).  Annually that is $2,167.20; at a 90% commission (most carriers do not discount commission on these processes). Your first year commission is $1,950.48 or $866.88 hourly.  Not to mention that the entire process only took 10 days so you got paid faster!!

Learn more about how you can accelerate your underwriting process by emailing moremoney@bbalife.com

This blog post is for insurance advisors only and not for public use. The above is a hypothetical example and does not take into consideration policy fees although the rates are accurate.