Understanding Accelerated Underwriting and Drop Ticket Applications
Recent advancements in technology and underwriting processes have revolutionized the way life insurance applications are handled. Today, life insurance carriers have the capability to process applications electronically, often without requiring a medical exam or extensive medical records. While these developments offer convenience, they aren't a one-size-fits-all solution. It's crucial to grasp the intricacies of accelerated underwriting and drop ticket applications, as well as to identify the clientele they're most suitable for.
Accelerated underwriting and drop ticket programs are distinct but can be utilized in tandem or separately. A drop ticket involves an agent completing a basic online application, after which the carrier collaborates with a third-party for a phone interview to finalize the application. The agent's responsibility lies in completing the foundational application, while the third-party handles application preparation and exam scheduling if necessary. Following this, the carrier procures medical records and fulfills all underwriting requirements. The agent's final task is policy delivery. On the other hand, accelerated underwriting enables the carrier to approve applications without medical exams or records. The carrier acquires the client's medical and financial information digitally, subjecting it to a predetermined set of parameters established by the insurance company. Clients meeting these criteria receive approval, while others proceed through conventional underwriting channels.
It's important to note that a drop ticket can initiate either accelerated or traditional underwriting. Alternatively, a paper application may also undergo accelerated underwriting. Both processes can coexist, although this isn't mandatory. Generally, these programs are most beneficial for young and healthy individuals, while those over 55 with complex health histories might not benefit as much. The appeal of bypassing lengthy applications and medical exams is evident, but it comes at the cost of relinquishing control to the carrier. The carrier retains full underwriting authority, and if a client doesn't receive the desired offer, the carrier won't provide feedback to the agent. Instead, the client receives a letter. Additionally, moving or exploring other options requires starting the process anew, as the carrier retains ownership of records and exam results. Some drop ticket programs may skimp on ordering medical records to cut costs, potentially resulting in less favorable rate classes. Opting for standard instead of preferred rate classes due to incomplete medical information is one such example.
Accelerated underwriting programs are capped by maximum face amounts, typically ranging from $1,000,000 to $3,000,000 depending on the carrier. The carrier typically requests an Rx report to examine the client's prescribed medications, checks the Medical Information Bureau for prior declines or ratings, reviews driving records, credit reports, and other financial data. Utilizing this data, the carrier assesses whether the client can be approved sans a medical exam or further records. If accelerated underwriting isn't feasible, the application reverts to traditional underwriting. This entails ordering an insurance exam and potentially obtaining medical records. However, the specific reasons for disqualification in traditional underwriting aren't disclosed to agents, but rather conveyed to clients through a letter.
While both programs, particularly when used in tandem, can save time for agents and clients, it's paramount for agents to discern which clients are ideal candidates and to manage expectations. Agents should communicate the possibility of additional underwriting requests after the initial application review.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through WCG Wealth Advisors, LLC a Registered Investment Advisor. The Wealth Consulting Group and WCG Wealth Advisors, LLC are separate entities from LPL Financial.
