A host of life insurance companies announced recently that they are expanding their e-underwriting services to more states. The insurers hope that e-underwriting will speed up the process for term-life applicants enough to motivate even more consumers to purchase the coverage. In our last post, we talked about the service in general. This post is devoted to offering consumers a few things to think about before they go down the e-underwriting road.
Price is a major concern. Industry insiders say that much of the decline in term-life sales was caused by the recession and consumers' cost-cutting efforts. Consumers still trying to cut back may want to steer clear of e-underwritten policies.
- Premiums may very well be higher for these policies. As convenient as the e-underwriting is, healthy consumers will probably get a better price by going the conventional route.
- Experts recommend comparison shopping, too. Independent sites can help to identify the companies offering the lowest rates based on some basic information (overall health status, birth date, gender, etc.). The site combs through the hundreds of insurance companies and kicks out the best rate or rates.
- Go to a direct seller to price a policy. Several of the nation's strongest insurance companies don't use commissioned agents. Their savings are often passed on to the consumer in lower rates.
Companies often charge e-buyers more to protect themselves from major health risks that "fall through the cracks." It's possible that a consumer with a major health issue could obtain an e-policy when the paper application would have been denied.
Insurers say the higher prices are just the cost of doing business -- consumers are trading convenience for steeper rates. Consumer advocates point out that rigorous underwriting costs much more than the simpler e-underwriting does. And, by speeding up the process, insurance companies are likely to close more sales. The six-week conventional process affords an applicant many opportunities to back out.
The lesson, then, is that fast isn't always cheap. And because these products are relatively new, claims processing hasn't really been tested. Buyers beware.
Source: Wall Street Journal, "Would You Buy a Life-Insurance Policy From This Machine?," Leslie Scism, 03/12/11