Category: Articles

1. A large producer of life reinsurance in Canada had a very knowledgeable president who was very cognizant of how reinsurance pricing and mortality curve could benefit his company. As such he was one of the most astute reinsurance purchasers ever seen and he in turn passed this skill to his pricing and underwriting teams.

One year when they were introducing a new product they tendered the quote to all active reinsurers in Canada as well as one based in the UK but a dominant player globally (the insurer had a subsidiary in the UK). In that era, not so long ago, reinsurers were actually coinsuring generously with first allowances beyond 200% of original premium and no chargeback in the event of lapse.

After weeks of bids going back and forth, as the wily President and his team played one reinsurer against another, the final sprint to the winners circle was between two reinsurers — a major Canadian subsidiary of a European global reinsurer and the aforementioned UK subsidiary of a global reinsurer. As pricing escalate to the 285% allowance level the victor emerged as the Canadian subsidiary of a global reinsurer. Congratulations flowed in the victor.

The vanquished UK subsidiary of a global reinsurer was so perplexed at the loss and finding it hard to fathom anyone having a sharper pen they asked whom they lost too. A fair question as reinsurers appreciate knowing who is the competition.

The answer came back that the winner was the “sister” subsidiary! Both finalists in the bidding war, which pushed the price 70% passed all other competitors, were in fact one and the same company.

2. Communication between departments in a company can often leave a lot to be desired. In one company’s eagerness to close a reinsurance deal with a winning reinsurer whose rates and allowances were extremely great the communication between the person canceling the old treaty and the person accepting terms on the new treaty was nonexistent.

The person agreeing to treaty terms of the new reinsurer asked for and got the treaty to commence on all policies issued with policy dates of for example July 1st, 1999. The person wrapping up closure of the old treaty terminated the existing treaty for all applications received after June 1st, 1999.

Yes you guessed right. A claim arrived on a case received after June 1st and issued prior to July 1st. The simple car accident fatality became a claim that both reinsurers said was not clearly theirs. When all three parties were in a room it was only then that the ceding company President heard how his staff did not work in unison on something as vital as protection of their retention and no gapping holes in the reinsurance. As always the result was a compromise struck after much embarrassment where all three parties contributed to the significant claim payment.

3. How does your reinsurer feel about fraudulent producers? What is the reinsurers’ stance on claims where the quality of producer selection and monitoring are directly correlated to early and uncontestable claims?

A $500,000 claim occurred and upon investigation the incidence of fraudulent misrepresentation leap off the documentation from the time of underwriting. Gross nondisclosure had occurred and had the full medical history been known no insurer or reinsurer in their right mind would have accepted to application let alone issue a policy. To make a long story short the file ended up in court where the insurer was ordered to pay since the evidence that was missing from the application regarding the deceased’s health history was indeed told in front to the deceased’s son and wife to the producer/agent. The fact the agent knew the story both as friend of the deceased and agent lead the judge to order the payment.

As the case was reinsured 60% the reinsurer was asked to just throw their $300,000 into the pot for disbursement. The reinsurer said it would only pay if the insurer would launch a claim against the agent for his fraudulent misrepresentation and omission of facts he knew about deceased. Insurer did not want to irritate its reputation amongst agents by suing one. The reinsurer refused to pay its share of the claim.

Should the “follow the fortunes of the insurer” be taken to the extreme by turning a blind eye to fraudulent agents? What is the true definition of final approval of claims mean to both the reinsurer and insurer? Claims sections of treaties are often left to interpretation at time of claims, which is erroneous, as it should be clearly understood from the onset of the claim-paying obligation.

This case ended up in arbitration where the arbitrator (a reinsurance guru) sided with the reinsurer and won the agreement of the ceding company President that the honourable solution was to sue the agent for damages as the reinsurer suggested; especially since the reinsurer did not hinge its payment to a favourable court ruling merely the act of pursuing restitution through the courts.

4. Translation is not a core competency of a reinsurer. A ceding company had drafted a new suicide clause and was in the final stages of translating it into another language. A translator of meager financial status was used to save some money assuming that final sign off would come from the reinsurer. The reinsurer got the final draft and with little attention to detail gave it its blessing.

Yes an early suicide occurred. When it looked so obvious that they could fight and win in courts on the basis of the suicide exclusion the insurer sent the file to its legal counsel (outside) for preparation of the usual denial letter and strong wording about “not paying in the event of suicide”…

The lawyer, happy for lucrative work from an insurer, was quick to point out that in his judgement it was foolish to contest the claim.

All had missed the key word “not” before pay in the suicide exclusion clause. The clause then read in its key sentence “will pay in the event of suicide with the first two years “.

There are times even a reinsurer makes a mistake and thus insurers should never leave to a reinsurer critical decisions that they have not fully reviewed.

It is said many times in our life and health insurance industry as in most industries or for that matter life that everything is cyclical. Sometimes we alter the cycle and sometimes it just goes away. Or so we think. Insurable interest and financial justification of an amount are subjects that keep coming back like a bad penny. Not sure where that saying comes from so I will have to research its roots.

This article was timely in 1994 and as the article read it was timely in 1930, 40,50, etc. It is an easy read for those who have any interest in our history. It should make you think that maybe, just maybe, some of our long held beliefs are not as strong as we would like. Truly most were mere suggestion that for lack of anything better they became larger than any urban legend.

The article also reminds me of the many people in the industry who gave me copies of treaties, humorous and often embarrassing letters or internal notes or historical books and notes on reinsurance and underwriting. Don Hickson, who had a voice so loud and clear the telephone was not needed, gave me the mother load of all such gifts. He gave me about 30 ancient Proceedings of HOLUA which have given me inspiration and examples on numerous occasions over my 35 years since he gave them to me. Many an article from the 1930’s or 40’s could easily pass for a current piece with only a change in the decimal point in the figures.

Thanks Don wherever you are.

Ross

2004-04-14

Marketing Options

May 1994

One of life’s great mysteries has been the struggle to find one’s roots and thus perhaps the meaning of life. Now that is a pretty heavy opening sentence and before you readers scurry off to a more enlightening piece of prose give me a chance to explain.

It’s true very few of us really give a country damn about how certain rules of underwriting and risk selection came to be. Fortunately I am both a pack rat of history and a human of considerable curiosity. I need to know if the first Great Home Office Underwriter, in the modern sense of risk selection, went to the mountain and brought back the tablets (first manual) or did the rules, guidelines and regulations of our very existence just ooze our of the ground like the oil on Jed Clampet’s farm (owned in conjunction with Granny and due justification for a joint first to die).

Although I am curious, I am also quick to be bored and like to know the road I am marching merrily along is going to bear fruit. If doubt sets in, I cut bait and start the motor for home. Many a false starts I have had but nothing has discouraged me from randomly pecking away at the notes, books and memorabilia that clutter my basement. What inspired me recently was finding a speech from years gone by, given to the Home Office Life Underwriters Association by Dr. Edmond Harding. He was, in his time decades ago, referred to as the “Tarheel Humorist”.

This inspiration came from his opening remarks to an audience of underwriters on the subject of being up to date and the redundancy of some of our actions. He said, “I saw a horse fly on the radiator of my tractor the other day. How out of date can we get?” How out of date, indeed! Time for personal digging into one’s roots and to see if underwriting folk were toppling on the edge of obsolescence. In my search I uncovered several stories or anecdotal tales that do not necessarily answer my question nor give me solace the rules are correct. However, at least it was a beginning.

In the Precambrian days of risk selection up to the 1940s, much of the time spent at Holua meetings was on occupations. It was a heavy duty concern as they wrestled with blacksmith, cobbler, bartenders (still do!), and lumberjacks and, of course, military risks (very real in the 1940s). I never knew such in-depth attempts were made at getting occupational extra premiums so accurate. Today it hardly gets a mention as very few occupations get any of a life underwriter’s attention.

An analysis of the minutes of the HOLUA meetings between 1956 and 1967 reveals that reinsurance got one trivial part on the agendas and that just shows how young the preponderance of reinsurance issues is for us young folks. Papers or discussions on heart disease made the programs eight times in the same period. Now guess what? – no jumping and reading ahead – topics near and dear to the agent made the program 25 times! Fifteen times the underwriters listened and subsequently read about speculation and over insurance and ten times the same group listened to agents lecture them on what they needed from risk selectors! Hello, read my lips. That is an unbelievable imbalance!

Comprehending how heart disease works and the intricacies of medicine are quite complex (either that or people spend too much time in medical school before they are allowed to treat hypertension). On twenty-five occasions, hundreds of underwriters listened to agents spell out what they want from the home office underwriter but obviously it never sunk in. Based on the number of times heart disease was addressed, one could surmise that building solid agent/underwriter relations is 300% harder than learning how the old ticker ticks.

The minutes of these meetings also record what is said so that distribution of words of wisdom and counsel can eventually reach even a greater audience. In 1933, the great Alton P. Morton, and employee of Manufactures Life at that moment, (yes, there was another Morton who was much more influence than I in the world of insurance), opened discussion on the subject of financial underwriting. One of the day’s big questions was, “How much insurance is to be allowed when there is no earned income?” This was in reference to people who were very wealthy (survived the depression with money to spare) and yet had not earned income. They were merely managing a large estate or counting coupons. Discussion was inconclusive. However, there was on minutia of detail buried in his part of the agenda that at times still lingers on in underwriting circles, namely, “… the further we depart from an indemnity basis in justifying the life insurance granted, the more pronounced will be the anti-selection.” That little gem of wisdom has been passed on from generation to generation (sometimes quietly).

Should we, the liberated reader of the 1990s, be astonished to learn that part of the 1933 agenda included J. Elliot hall, and agent of renown from Penn Mutual, whose speech was not recorded. It was titled, “How the General Agent and the Agent can Aid in the Selection and Assist the Company in Maintaining a Favourable Mortality.” I can only speculate that either the title used up all available space or the fact that the title mentioned agent twice and underwriter not at all meant it was of little value to future readers. Pity, I would love to read that article. (Hope some one says that about me some day!)

Today I am often asked where the five times rule for “keyman”, or more recently dubbed “keyperson”, came from since it sounds so arbitrary and is indeed used in all too arbitrary fashion. I found the answer buried deep in the moldy copies of old minutes. In 1930, the rule was laid down as a suggestion by one mere mortal in what is often referred to as The Laird Paper of 1930. Mr. Laird explained that the “keyman” (this is pre-enlightenment) should be valued at five times their earned income for insurance purposes. This simple statement became a law that has survived numerous wars, presidents, prime ministers and CLU grads. At least we can now honour or blame a named person! To show you how powerful Mr. Laird’s paper was, it was used as justification in Doug Weir’s (a foremost underwriter of North American Life in Toronto) comments at the 1959 HOLUA meeting. After that, it appears Mr. Laird drifted into obscurity but the ‘five times’ rule lives on.

In 1939 Morton (elder, not pup) was on the HOLUA executive and, as a fan of agent and underwriter getting into the same groove, we can only assume he was a part of bringing the following topic to the fore for underwriters. The title of the HOLUA session was “Establishing and Maintenance of Good Relations By The Underwriting Department and the Field”. Malcolm Adam of Penn Mutual (Penn Mutual must have been a leader in field relations) gave a great paper which could be given to any gathering of underwriters today. He tried to make four major points. I leave you with the brevity of Mr. Adam’s headings which leave little if anything to the imagination of any reader and presumed listener of the day:

1) The agency force has a right to expect that we [underwriters] know how to select risks.

2) There should be absolute fair treatment of all agents

3) There should be consistently prompt treatment.

4) Underwriters should be reasonably educated on the subject of selection of risks.

Postscript: I had the honour of meeting Al Morton in the 1970s and he flattered me by introducing me as his son on several occasions. (I doubled checked with Mom on this to make sure it was just a joke – he left Canada and Manufactures Life in 1947, the year I was born.) He was President of HOLUA 1948 and became a full Vice President of Prudential of America in 1963 after 16 years with them. Al is now gone in body from our midst but remains forever part of our heritage and I was honoured to have encountered him, if ever so briefly.

There continues to be times in my life that I snuggle down and feel secure that I have seen it all and nothing startling can happen. But, just like the time I sat down on a red-hot cooking iron hiding on the fringe of a warm campfire, I am jolted to reality and put into hyperactive mode. No my travels have not put me (or rather my dernier) in contact with a hot poker. However, I have just been presented with the results of a small survey of facultative underwriting as practiced today in my favorite market for insurance, Canada.

We are all too aware that everything is measured today; be it your legs for a suit or the number of life insurance applications that fall into measurable categories. For a reinsurer the measurables are time service and decisions — how many standards, how many +50%, how many +100%, etc. through to declines. The latter were always in the minority. There was a time when a reinsurer would concur with the prowess in a direct company and agree that the particular impairment or combination of impairments was such that decline sufficed. Did that happen often? No. The reinsurers declined about 20 to 30% of what was sent facultatively to life reinsurers. There was as always free enterprise at work and great disagreement abounded over which cases were indeed decline, thus keeping the incidence rate for all declining to low 20% level.

With “hot” competition that number was perceived to be lower today; but, given that risk selection still meant discarding the really poor cases, it should not have changed more than 5%. There was something comforting in believing that reinsurers still were predictably declining to accept those applications for insurance where the proposal’s health history, occupation, avocation, aviation or combination of all. After all, the laws of antiselection, deteriorating health and the shear cost of mortality were, I thought naively, still barriers to accepting certain risks.

Did mistakes ever happen? That is like asking if my stomach or more southerly regions of my digestive pit have ever known the ravages of food poisoning or overly spiced dishes in some exotic land (Bombay to Richmond Hill). Blunders happen. In a rush to get a decision out to a customer (the insurer) mistakes happen in transcribing the quote at the reinsurer’s communication centre (fancy monogram for fax or telephone). Wrong message attached to wrong file. Missing page in a reinsurance file having disappeared on the photocopier or fax machine. Young Turk (not sure if this is a politically correct term today?) underwriter who does not hear the medical consultant’s opinion or did not ask the right question has put the reinsurer in jeopardy many a time. Any or all have happened on cases and the reinsurance underwriter goes from Turk to turkey in a matter of minutes.

Now to the true-life adventure or at least a paltry few words of comments on today. A noteworthy Canadian insurance company’s underwriting department, in its zeal (zeal is good) to get the best for its brokers, shops the file. This is when a ceding company, the insurer, decides that it may not want the case or feels the assuming company (reinsurers) might like it better the file to 2 or more reinsurers. The reinsurer first back with the lowest price wins in most cases. There are some companies with complex reinsurance rules as to who wins what, when and how. Knowing the readership, I will stick to the simple explanation that the first low price quote for the case is awarded the honour of providing risk coverage for the ceding company. More succinctly put, the first in with cheapest price wins!

Since reinsurers see so many non-standard cases, their expertise can often save the day and find a price for most cases it sees. Experience has varied from reinsurer to reinsurer. The odd reinsurer (please peers do not take that as a direct criticism) may win cases in greater numbers than its competitors. The other competitors complain, throw mud and stomp their feet. The next month or quarter, the stomper becomes the stompee and the stompee becomes the stomper. In 28 years I have witnessed and sought help every time the tables turn and the oppressed become the oppressors. Stompers can be oppressors as can they be oppressed and stompees can be oppressed or oppressor?

The fine company in question or more correctly its service oriented underwriting management, followed 19 cases that it wanted no part off since by all normal underwriting rules of protocol and risk selection these cases were “really, really bad”. Immediate death claims all. Straight to the mortality heap for these 19 unquotable cases. The brokers who found these lives (just) should be ostracized for at least an hour. The first step in the travels of these 19 cases was to the copier or fax, where, with the push of a couple of buttons, reproductions of the file ended up in five reinsurance abodes.

With a craving like you could never imagine, diligent and well-trained reinsurance underwriters attack the files. Given that cases reinsurers see are all bad or tough the reinsurance underwriter is charged with finding the good and thus putting a price (winning) on the file. With the latest in medical know how beating on the computer screens as the medical networks get searched, the underwriter is frantically trying to find ways to quote as low as possible for that marginal edge over “reinsurer x”. I have never met “reinsurer x” and have often wondered, aloud at times, if I will ever meet anyone who has worked in “reinsurer x”.

Constantly nagging in the left ear is the conscience saying go lower and faster. In the right is the corporate actuary saying, “don’t do anything to risk our financial future”. This statement is being made when they themselves do not have a clue what the financial future will bring. Ha, “the devil made me do it” becomes the plea of the often banished underwriter. Regrettable the role of devil can be played by either the marketing conscience or the corporate actuary.

Sleepless nights abound as the reinsurance underwriter relives over and over again the combinations of CAD, IDDM, MS, CVA, BP, PP, SGOT, SGPT, AP, etc. Or was it just their partners snoring? Every decision that went to the edge of reasonableness will haunt the reinsurance underwriter for days or at least until the next beer. The rookie reinsurance underwriter has far more sleepless nights than the seasoned veteran. Until you realize no one really cares the next day, you worry. Thus experience has its rewards.

Where was I before I diverged somewhat? Right, the 19 cases and earth shattering decisions. I guessed that perhaps a third of the 19 cases would get a quote of some kind from perhaps one reinsurer. To my befuddlement every one of the 19 cases received in bold print a quote! That in and of itself was shock enough but it was not the story.

Every single case of the 19 received a table 2 (+50 mortality points for the ununderwriters)! I still, months later, shake my head or at least it is being shock at the knowledge that being good with the thin pointy pencil on a third of the cases is no longer sufficient. The “bar has been raised”, “benchmark heightened” or the competition’s tougher in plain utilitarian English. Then I grab myself (figuratively not physically) and rationalize that perhaps the younger student of underwriting cannot count beyond 50 (a binary system involving no more than 5 sets of fingers). Has the word decline ceased to be necessary. To most readers of this magazine the answer is yes. To a select few the answer is no. There are indeed cases that should be declined as potentially immediate risks and if over a couple of years you get enough of these you are in big “do do”.

So much for my years of accumulated expertise and funny stories helping me predict the world of facultative underwriting. I am in a world of unpredictable events. The next thing I will hear is that Sun and Manulife have merged and their CEO’s are coexisting in the same seat of power! The next thing I will hear is an actuary building in a percentage for deteriorating mortality. The next thing I will hear is that my pending book is a best seller! The next thing I will hear is that none of the cases I underwrote ever became a claim! So much for the reliability of predictability. Our industry is changing and yet there remains the same competitive beehive of activity it has always been.

I thank the company for giving me a new insight into today’s reality, the lack of predictability and the answer to my question. The question of course was who was the winningest reinsurer on these 19 decline cases. I honestly will be eternally thankful for the news that it was one of the other reinsurers who won 11 of the 19. There are times it feels good to come in 4th! I have always wanted to win the right ones and lose the bad ones to my competitors (bad as likely as not being in the eye of the underwriter). Taking risk with such immediacy attached to their imminent mortality is not what I want to win.

We are very fortunate to be operating in an environment that is very unpredictable and thus challenging. Soon the norm like testing for HIV will reach new thresholds. Soon those that are HIV positive will not be declines as s already the case with at least one US company. Remember that just prior to the HIV testing our industry was very, very comfortable with accepting applicants for insurance amounts up to $1,000,000 with only a nonmedical. May those days return? Given the rush to liberalize our underwriting process it can only be around the corner.

As for the broker or agent of record your every dream is coming true. Well not quite, since having met a lot of you your dreams are sometimes beyond the realm of being fulfilled by any underwriter.

I am not a fan of Stephen King’s writings but my children are avid readers and movie goers for all King’s creations. Actually they are hardly children anymore as the youngest is now 18 years and 8 months old. Thus I wrote the references to King’s writings out o respect for my children’s tastes in literature and movies. It is hard to escape the public relations when either book or movie hits the streets. I do like horror movies but not his.

When there was a flurry of publicity over the latest King launches it made me think of the horrors that arise in the minds of insurance people (seller and risk selector) when ever the task of underwriting or merely processing a case is the issue. As old as insurance I am sure is the debate or confrontation between the producer and underwriter.

With events in the Canadian distribution segment looking for a target for its poor closure on large cases Steve (again the erstwhile editor of Marketing Options) asked me kindly to write a little on the subject of relations between agent and underwriter.

I did and as it turns out it is one of those themes that I am constantly asked to write or speak about in Canada and around the globe. I am no expert but have lots of experiences. I do not have all the answers but have an opinion. Steve liked to print for all to see my opinion.

Ross

2004-04-13

Marketing Options

May 1992

The distance between the agent and the head office underwriter is probably greatest when the issue is financial underwriting. Then Lucidity fades as the sun dies. Long, deep shadows of mistrust and deception sweep over a barren landscape. It’s a setting created by the Master of Horror, Stephen King, where one can never be sure who or how many will pay the ultimate price before the tale is told.

In this morbid setting, the head office underwriter talks in terms of theory and the agent talks in terms of reality, all the makings for a macabre sequence of events. As the underwriter delves menacingly (in the eyes of the agent) into the file, the agent becomes nauseous with despair (in the eyes of the underwriter). The slithering tentacles of the underwriter entwine the case as it attacks with more and more vile questions and bone-crushing requests. The crafty, devious answers of the agent are snarled from between barred fangs as it fights to protect its position like some cornered mongrel.

Too horrible for even Stephen King, you say? Perhaps. But versions not much tamer than this abound in our industry today. Is there an answer to the needs of both these parties? In a conventional sense the answer is probably a rapid and off –hand “No!”, but in an unconventional sense the concerted efforts of both could accomplish what pages of aptly phrased words cannot.

Many, most, all underwriters have heard in their first weeks on the job that agents were troublesome creatures, loath to give enough details, all-in-all general nuisances to be scarcely tolerated. Only a select few underwriters have been privileged to have been indoctrinated or re-oriented by a truly cognizant tutor to the simple truth that without the production of the persistent agent over many a table, the job of underwriter would not exist. Rather, the horror stories that surround underwriters during their initiation would warp the rational thinking of any mortal. Every senior underwriting officer has a cache of stories to enthrall the rookie and set the record straight – it’s underwriting versus agent!

To imply this verbal persecution is a one-way street is childish at best since there is no shortage of agents in our industry that have tales of underwriting malice and misbehavior. What decent agents gathering would be complete without the tale of a malicious underwriter declining a case for absolutely no good reason. The facts relayed by the agent to the awaiting audience maybe embellished beyond reason, but to the eager and receptive audience, it is The Truth. It is a rare occasion when the ‘risk selector’ in the sedate safety of a head office is lauded for playing a complementary role in expediting a difficult policy on time and at standard rates.

For years these issues have not changed nor have the perceptions (that wonderful words so quickly called upon when the facts are somewhat thin and do not make the story as engrossing to the reader). These perceptions die hard and make dealing in reality difficult. Will there ever be harmonious agreement on all large cases of $1,000,000 or more? Richard and David and Joe and Jim would not expect this eventuality since they would be the first to acknowledge that at times an agent’s enthusiasm has gone a little overboard in using a projected income or anticipated tax problem. The delicacy arises in trying to guarantee that the underwriter will not go above and beyond the role of the risk classifier and, in effect, throw out the agent with the case or vice versa.

There is absolutely no substitute for the one-on-one relationship between the underwriter and the producer. The underwriter must honestly act as the assistant to the agent while selecting risks that meet the company’s profile of acceptability. Although this may seem trivial as a statement, in the real world of real applications for insurance, it is not.

There is no magic in getting the agent and underwriter in synchronized behavior if both have or have had wise mentors at their side. The mentors can nurture the best solution by teaching the need for prudent decision making taken with a large dollop of common sense. A good senior underwriter with many ears of worldly exposure can instill the desire in another underwriter to get the case issued on some basis that makes sense. The knowing counsel of a seasoned agent who has learned the ways around head office mine fields can assist another agent in preparing the case to assure quick issue for the right amount, the first time around.

To the underwriters who can teach and the agents who can explain, the industry should be indebted. To the self-righteous antagonists in both camps, may you see that your perceptions are wrong and that none should be condemned to dwell in the dark worlds of Stephen King. An exchange of views will always create what accusations can never accomplish – a concerted and understanding effort for the consumer that benefits us all.

The year was 1992 and it was early in the year. Remember I often wrote the article months and months in advance of publication. The editor and writing mentor in Steve of Marketing Option fame was always one to have the articles ready to go well in advance and sometimes so “well in advance” he could go three without asking for more. Early in 1992 the talk in Canada was of underwriting and trust. Can the producer/agent trust the underwriter? Can the underwriter trust the producer/agent.? Can the reinsurance underwriter trust the insurer’s underwriter? Lots of questions and the permutations were endless.

In an industry based on trust its definition sometimes gets confused with procedures. The complexities of the later years would be exaggerated to the point where the conspiracy theory amongst underwriters was a great “scapegoat” for something going wrong. Reinsurers since time began have been used as the “excuse” for everything from the cash values being too low (now what did the underwriter do again to build the product?) to declining a standard risk. Broad shoulders helped if you wanted to succeed in reinsurance.

Not sure why Steve insisted on this article but it gave me a chance to interject some acquired Indonesian slang into an article. By this point in my career I had been to Indonesia on business about 4 times and quite liked the experiences. I am not sure I could say that for the last few years.

Trust remains an integral part of the reinsurer-insurer relationship. If either side abuses it the seamless flow of risk between the two can be lost forever.

Note the spelling mistake that escaped the keen eye of the editor and me. Steve was so frustrated with my verbiage at times he even bought me the dictionary of American slang and if there had of been one he would by the Canadian equivalent!

Ross

2004-04-12

Marketing Options

Sept/Oct 1992

Pilfering from the pioneering scribe of all home office underwriters, the title says it all. Or is it still relevant to ask ourselves this question? For those of you born in the fertile fifties, the author in fact is none other than Charlie Will and his words of wisdom from long ago translate from Malay into “Does it make sense?”

Simple words coined to guide the home office underwriter. Charlie was trying to say that if the home office underwriter thought the agent was a goofball and presented poor information, just decline. On the other hand, if the agent was trustworthy and if the idea behind the application sort of made sense, go ahead and accept the risk. The whole premises of North American underwriting seemed to focus then more on the artistry than the cool reasoning behind the decision. (Some critics stated in those early days of yesteryear that head office underwriting was merely a facile excuse to hide the lack of science in the underwriter’s tool kit.)

Unfortunately, the element of trust seems to have vanished without explanation. Other than the rare instances of agent misrepresentation, there is a dirth of explanations for this prevailing attitude. I cannot pinpoint the date it began to invade our industry nor the incident that triggered the defensive mechanisms that took control of the underwriters’ psyche. There is strong evidence that underwriters were taught to trust on one and the list of paper requirements grew larger. But a hidden underwriting element worried that too much paper was feckless in the fight against real agent deviousness.

Consequently, three underwriting rules evolved. Underwriting Rule #1 states that if there were only a few pieces of paper (the underwriting evidence), then something was not being admitted and it was best to ask for more paper or decline. Underwriting Rule #2 proclaimed that if there was close to one inch of paper (2.54 cm. For the purists) to support the application, it must be standard. Then the surprise of all surprises, Underwriting Rule #3 decreed that if the paper pile approached 2 inches (5.08 cm.), it was a decline. So a succinct set of papers, regardless of how well representative of the facts, had to hide some devious plot to over-insure (Rule #1). Excess paper became synonymous with standard issue (Rule #2) but reams of paper which could include the agent’s own poignant words incurred the underwriter’s ire and a wrathful decline (Rule#3).

If one contrasts the North American reality that blatantly hypes mistrust to the European laissez-faire attitude between agent and underwriter, it is remarkable to witness that both are in the same business. Companies in Europe regularly accept large amount cases with half the financial requirements of their Canadian or American counterparts! I have witnesses in my lengthy career the miracle of multi-million dollar applications (in original currencies francs, marks, lira, or kroners) being issued on the simple poignant prose of the hallowed agent plus perhaps an accountant’s or banker’s letter of reference as to the value of the proposed insured. In fact, it is not a rarity to see cases on young adults or old kids being insured for megabucks on the testimony of just the agent! Not only is the unadulterated trust in the agent paramount, nothing has occurred to shake the underlying trust the agent feels for the underwriter.

Quite frequently the North American underwriter is privileged to partake of a cross –the –Atlantic case for reinsurance reasons. The ensuing stretch for the Tylenol bottle is as rapid as a Guzman fastball (for Expo fans, this is Blue Jay simile). The root cause of these rattled nerves and tormenting migraines is the lack of financial justification beyond, at times, nothing more than the well-written and concise letter from the agent reciting the man’s value in life. On occasion there may be two or three testimonials from the likes of a banker, bringing credence of the agent to the 100% level. As oft as not, the North American underwriter collapses over his desk and in that prostrate position exclaims, “What the heck, if the Düsseldorf underwriter believes the sum applied for is okay, then that’s fine by me.”

The foregoing comment on the approach to risk selection is not meant to incriminate anyone or be so bold as to decipher who is correct. I am merely, and with due lack of diplomacy, trying to understand why. Why would a niece or nephew of a rich (make that really rich) person residing in Düsseldorf qualify to be insured for a mega policy simply because “she is the youngest and healthiest member of the family and is charged the lowest mortality rate and thus should be the insured under a humongous policy bought for estate planning purposes of an older uncle, aunt or father”?

If this occurred in North America, the underwriter would not only decline the application but said application would become the talk of the next underwriter’s golf tournament. The underwriter would also have the agent sent for a CAT scan of his most northerly protrusion.

Why in one instance is there so much trust in the appropriateness of the action while in the other there is absolute disbelief in the insurable interest and motives of agent and applicant? How did two similar industries like life insurance in North America and life insurance in Europe develop such differing standards of agent credibility? Have North American companies been bamboozled more frequently? (“Probably!”, come the catcalls from the more cynical.) Can Europeans afford to be paying more in benefits than the North American company?

We, the big we that includes all us in the insurance industry (whether active, inactive or on redundancy leave), probably cannot completely answer any of these questions. On this side of the pond, we sell complex plans that minimize the dollar the customer spends on protection and tax planning. Although not as tax driven, the European too has complex needs covered by unique plans. I would like to think that it is not plans that lead to the North American paranoia around antiselection. Something, somewhere deep in the bowels of our past ahs made the agent’s word almost valueless and that millstone has been passed from neck to neck without appeal of its consequence. Pity. The trust appears to still exist in other jurisdictions that perhaps rightly or wrongly (naively?) have not incurred any financial consequences from that trust.

As I travel between these two venues, I almost become a dithering nincompoop (there are some who say the “almost” could be dropped) over which hat to wear since both logics could fit the circumstances. Or so it seems. When pricing a product in a typical Euro community, the Merlin-like actuary uses assumptions based on a mortality table that is far more conservative and safe than a North American table. To complicate matters we have a propensity in North America to assume significant mortality improvements over an indefinite duration. By using a higher Mortality assumption and ignoring aggressive improvements, Europeans acquired a significant mortality gain, possibly in the magnitude of 10% to 20%. My colleagues in Europe harp in, with remarkable disdain for North American mortality results, that their revered agents are under sever pressure to tell the truth not oversell applicants, thus enhancing their safety factor. Indeed, there are indications that the agent and underwriter over there will not allow themselves to be mortified by early, big and embarrassing claims.

In places like Indonesia (a very representative member of the emerging Asia Pacific market) both North American and European insurance management, especially home office underwriters, are trying to shape underwriting patterns. As larger cases are being written by agents coincident with the economic growth, the average face amount has escalated from the mere thousands of dollars to tens of thousands and hundreds of thousands will soon be common. Enter the outsiders or foreigners who want to sell their advice to this new market. One expects and can actually witness a total frustration with these outsiders’ views. One set of ‘teachers’ from the opposite side of the Atlantic who imply there is a better way to handle agents and large cases.

The role of underwriters and their interaction with agents is so critical in these formative years of jumbo Indonesian cases that we, the outsiders, are probably causing more confusion than order. The remarkable and admirable trait that is visible, however, is the Indonesian ability to cut through our foreign prejudices. There seems to be a very real desire by their underwriters to help the agents get the case through the maze while exercising the skills of a prudent company’s risk selection. It helps to have the field force so in tune with helping the companies succeed – it’s called ‘company loyalty’.

“Apakah itu keputusan yan benar?” For the unilingual audience that loosely means “Will the underwriter learn to ask the correct question first?” The question which he must ask himself first is Charlie Will’s question, “Does it make sense?” When he’s done that he is able to work intelligently with the agent because he can structure his own questions to the agent accordingly. The responsibility is then placed with the agent to truly listen and help expedite the issue of the policy to everybody’s benefit. Perhaps the penchant for underwriters to ask improperly structured questions and agents to impatiently listen to questions, even when they are the right ones, will not infect Asia Pacific.

As larger and larger cases are becoming the norm in places like Indonesia, there is the opportunity to learn from all of the older, but often not wiser, markets how not to make the same mistakes. They are in the enviable position of having all the modern technology and education without the hang-ups of Western ways. The rapport between agent and underwriter and underwriter and agent (just to show I can see the issue from both sides) could forge a common bond in this part of the world that rejects the worst of our own prejudices whose roots are already lost in the archives.

Agent and underwriter working together in Indonesia to fashion sensible guidelines for insurance interest and risk selection for the benefit of the life insured and insurer may be the greatest contribution these two contingents can muster in their life time. Now, that does make sense!

Ross’ Hard Earned Rules

1. Big and early claims will test the best of underwriters and management regardless of how well you select risks.

2. Be proactive in analysis, questioning and agent training as to your needs.

3. Does it all make sense?

4. How good are the sources of your information. Third party information gatherers can be worse than agent or better than accountant.

5. Does the agent know the owner, insured and beneficiary? How long and well?

6. Did the applicant owner approach the agent or has it been a long “sales process” by the agent?

7. Get the agent to sign a synopsis of the financial aspects of the risk and his rationale for the sale.

8. Know; really know the lender of money as beneficiary.

9. Audited statements are excellent if you read the fine print to make sure they are truly audited and represent a complete company profile financially.

10. In partnership insurance who are all the partners and are they all insured equitably?

11. Does the sum assured applied for (and in force) represent the absolute maximum of a companies worth or a reasonable estimate of its worth (per share)?

12. Get your senior officers to agree on your company’s position on estate protection (no brainer), estate equalization (harder to adapt) and/or estate creation (avante garde).

13. Never, never allow a person to be worth more dead than alive to family or business!

14. Multiples of salaries for keyperson or personal insurance are strictly guides and must reflect in summation the true financial loss in terms of the time value of money.

15. Banks make great beneficiaries but they are not necessarily without bias — they always win with or without the insurance.

16. Is the application for insurance complete, current and all information volunteered on the application or in additional notes, memos or letters?

17. Are you guaranteed that the in force to be replaced will indeed be replaced? Do you follow up? Do you have legal remedial solutions?

18. Make use of your own companies accounting and investment experts to see if the finances are right on.

19. Use the Internet as you personal search engine for finding both personal and industry information.

20. Use your reinsurer to build a financial picture even if it means you and/or your reinsurer visiting the applicant for detail and peace of mind.

21. Never reinsure the risk if in your opinion the financial picture is unacceptable and the risk makes no sense since although you can reinsure the mortality you can never reinsure the notoriety from a bad claim.

22. If, with your advice and counsel, the agent cannot make it make sense, decline.

Two years after the start of the Trudeau years and the whole new appreciation for the red rose, the Canadian life insurance industry was “shopping” substandard or near substandard life insurance applicants to reinsurers for their opinion and price. First in, with lowest price, wins were the predominant rule and today that stays true. Pioneering efforts by Ian Michie and team at M&G Re (a reinsurer once active but now merged into history) in its battle with “sister” company Canadian Re took every opportunity to encourage cedants to send their sub par business to the reinsurer. The reinsurer in turn would surely price the impact of whatever the impairment at a much lower price. Voila, reinsurer happy; cedant happy; agent (surely you jest to speak of brokers in Canada in the 60’s) happy; applicant a policyholder.

The arrival of some rookie European reinsurers heated the battle for not just automatic standard excess insurance but the “sickies” that, as we were to learn, agents had files on in the back room or at least the bottom of the bottom drawer. Late 60’s and early 70’s were full of fascinating stories most of which have to wait the 30 years before publication. But the reinsurance industry had its share of alcoholics (could note understand why anyone would rate someone who drinks a bottle a day), nymphomaniacs (a marketer never to be witnessed again), egotistical doctors (instant “I can take that standard”), actuaries (antiselection, not a pricing consideration) and underwriters (pass one exam that was written in the 1940’s and you too could bind risk for billions), and stupidity. The latter can be said only in hindsight since at the time most of the industry thought the moves to be merely avant-garde or “stepping outside the nine dots”. From the 1998 vantagepoint the nine dots were often nothing more than the 5 stars on a liquor bottle.

Easy, don’t lynch me yet you old folk. The times were great and everybody did drink more and had a different approach to life compared to today’s mineral water craze (will that be sparkling or not, imported or domestic, with sulphur or without). Jeez it was much easier to sit down with the upper echelon of the 70’s and have the kingpin host just say “doubles all ’round”. Within minutes we could be eating. Over the sumptuous red meat meal, talk of starlets, hockey scores, and cars predominated. As if by magic the last five minutes saw a side bar discussion (the 90’s tribute to our vocabulary) on the merits of entering into or expanding the shopping program or perhaps begging for a chance to take some automatic excess.

As usual I digress. The fledgling world of reinsurance was in reality just getting its license to fly so to speak. After decades of only trivial amounts of reinsurance going to “foreign reinsurers” and the predominant amounts going to either the parent company or in trading agreements with other cedants (i.e. Manulife would give some to Sun, Sun would give some to Manulife, Maritime gave to Empire, Empire gave to Dominion, etc). In fact, if my old tattered notes from 1970 are to be believed, less than 4% of all mortality risk was being reinsured outside the aforementioned. The exclusive reinsurers were far from a mainstay in Canada. Compared with today’s approximate 30% plus of all new business mortality risk being reinsured the paltry amounts then seem barely adequate to pay the salaries of all the reinsurance staff. Of the tiny amount of reinsurance perhaps 20 to 25% was facultative shopped business. Today that percentage is about the same.

Even with the full understanding of the volatility of facultative business, the antiselective nature of some participants (honestly, very very very very few) and the poor placement ratio of extra premium decisions, it has blossomed. In 1998 we are witnessing about 4% of all cases being written (not necessarily issued) ending up in the reinsurers offices (yes plural) for individual appraisal. As a bit of background the CLHIA statistics show that during the last decades about 4% of all business is declined and upwards of 4% is issued other than as applied for. Since at this point in time reinsurers have not started bidding the price down on standard business it is safe to assume the ultimate target for the reinsurers is to get to see all 80,000-problem cases per year.

Getting back to the reinsurance underwriter, we see someone who needs to be knowledgeable, innovative, somewhat gregarious, endowed with a strong sense of humour and finally a keen and confident communicator. An underwriter in a ceding company has similar skill sets but each takes on a different weighting. The ability to communicate with the broker trying to get a commission is much more challenging than the reinsurance underwriter calmly chatting about the merits of a particular facultative case with a peer in a ceding company.

The complexity of today’s life insurance world, the extreme pressures of “being profitable”, and the intensity of competition amongst too many reinsurers make the attributes of what I see as the successful reinsurance underwriter very visible yet not always easy to find. Even the constant workload that relentlessly consumes 10 hour work days is beyond the mental stamina of many underwriters. During a typical day the average reinsurance underwriter binds their employer to somewhere between $6 to 12 million of mortality risk (in a year that’s about $1 to 2.5 billion of risk).

The attributes I feel are important may vary from the many scholarly opinions of reinsurance and insurance executives who abound in our industry. To say I have always hired successfully would be wrong. To say I have never hired successfully is only a rumour fueled by jealous competitors. Remember the great words of Harold Ballard “When I want your opinion, I’ll give it to you”.

As succinctly as I can be I will try to describe what I think are the good attributes of the star reinsurance underwriters throughout the almost thirty years I have been witness to the risk selection process in our industry. Reaction will be from the “Who are our underwriters?” by some senior executives to “Never met a good underwriter yet, let alone a star!” by some brokers. There are after all many a consistencies in our business that never diminish in value.

Knowledge plays less of a role than I initially thought given that it is more often the ability to shape knowledge into solutions that measure a human. In fact marine scientist Dr. Joe MacInnis said “The larger the island of knowledge, the longer the shoreline of wonder.” The original underwriter was burdened with only rudimentary information and relied an others to contribute the knowledge — medical advisors, actuaries, lawyers, financial consultants, and marketing directors. As costs and scarcity of advisors took hold the dependence on one underwriter to make a decision based on a spectrum of knowledge beyond any one degree became commonplace. Underwriters attended seminars, tended to come to occupation with a university degree (never seemed to matter in what as even my abstract math degree worked), found a new set of exams under the auspices of the Academy of Life Underwriting, CLU courses, formal mentoring programs and time spent reading claims! But at the end of the day it was the “wonder” about the individual case that made for successful application of knowledge.

Innovation is so easy to talk about but so hard to witness in every day life. When a case arrives at a reinsurer it 99% of the time has a problem attached, be it medical, aviation, occupation, avocation or financial. The underwriter in the cedant has discovered the problem, now the reinsurer’s underwriter must find a solution. One of the most famous underwriters of the last 50 years, Charlie Will, penned or at least immortalized the words “Does it make sense.” Looking hard for all the good things about the case that soften the impact of the impairments to standard issue, the reinsurance underwriter is trying to make a decision that makes sense. There are times that even with extremes of innovation at hand there is still the decline because it does not make sense. The greatest challenge for the underwriter is to not just say no, since that was the initial option at the insurer.

Gregarious characters survive in underwriting because they thrive on all the flocks of brokers, marketers, actuaries, claims personnel and others who flock around to either encourage leniency (almost clemency at times), lunacy, meeting unprecedented mortality assumptions, failure (brings more work to claims area) , and of course lowest cost producer. There is always someone or perhaps a team hovering over the underwriter to see that it is done right, which is a moving target. If you are not gregarious by nature watch out for the stares will wear you down. Of course, since there is always an “of course”, being too gregarious can shorten ones career as entertaining the flock takes precedence over getting the work done.

Laughter is always the best medicine. Read twenty sick cases in a day about every possible impairment and body part and you are ready for release. Release is in good nature humour or running to your doctor with the symptoms of the day. Barely 24 months go by and we see one or more neophytes leave underwriting because they have sympathetic illnesses directly related to the days reading. The underwriters who can poke gut wrenching laughter from their colleagues are super. Those who can find humour in the sickest of cases also break the spell of impaired underwriting. The somber individual does not survive the cut. If you are not clever with the use of humour, you better be a klutz that attracts laughter with every guffaw.

Communication is the key to success in many occupations, perhaps all. The reinsurer has to communicate well within their company to try and enlist all resources in building the solution for the client. Getting the message through the myriad of obstacles to the broker via the cedant is often a hair-pulling extravaganza. You know what you need but can you communicate well enough to the cedant underwriter so they in turn can communicate the message to the broker. Most of the time it works but in about 5% of cases it fails. Reinsurer error. I have yet to discern early in an underwriter’s career who will be the super communicators. The maturity element has a lot to do with it as does the self-confidence that comes often years into the program.

A lot of what makes the reinsurance underwriter successful in a never diminishingly competitive industry can apply to the underwriters in any ceding company. The biggest differential is the nature of the biggest issues I have always heard about. In the insurer it is often the seemingly constant battles with brokers or agents over trivial items or even the repetitive nature of each challenge that provokes departure or worse, disdain for the job. In the reinsurer it is the never ending files of impaired lives that are always wanting standard and the fact underwriting has for decades been the whipping boy (today it should person but I cannot even pen the words whipping girl) for reinsurance decline in new business or loss of a automatic treaty. Never any applause but always lots of cryptic criticism.

With the advent of machines taking over underwriting and margins narrowing underwriting will change again but the root issues will follow once the broker realizes he is talking to a machine. No one will think of the standard lives according to a machine but those spit out, as rejects will now be back to human intervention. Today’s facultative leadership in the likes of RGA is an example of the torch being handed to the new leader in facultative decisions. As much as the company I work for feels confident in its risk selection, it would always relish ways of sharing that creative task with the insurers. We have to get that talent and authority to underwrite back in the ceding companies to partner the reinsurer more on substandard. As that happens it will be even more profound that pusillanimous underwriters need not apply to either of the insurer or reinsurer. Become an actuary or claims executive.

Being tone deaf and absolutely perplexed at the mere sight of a sheet of music I have often found myself on the wrong hymn but never in the wrong hymnbook. As I sang my heart out, those around me stared in disbelieve that anyone could be so terrible at something as simple as singing along with the old favorite hymns. “Was he being an obstinate child?” or “If he wants to desecrate the sanctity of the church he is certainly accomplishing that mission.” Were two statements heard as I moved from youth to adult.

We are all taught out of certain books. The books can be works of literature or snippets of wisdom passed from elder to youth. The wonder of our industry is that there remains today a dual set of tablets that were obviously carried down from the hill to two different audiences. The one set of commandments stated in fewer than 10 points that “Thou shalt get out there and sell for all your worth”; “Whatever the premium you can coax from the applicant justifies whatever corresponding sum assured that generates”; and “Financial justification is a euphemism for seeing how big a cheque the applicant can write without bouncing”.

The second set of commandments numbered thousands and fell under subheadings like lifestyle, occupation, aviation, avocation, medical, nonmedical and financial. The subheading financial struggled for years (since 1938 at least) for meaty rules of conduct that succinctly categorized the amount of insurance that should be in force on a person. In 1938 at a Home Office Life Underwriters Association annual meeting a speaker as an example (possibly grabbed out of the air or was it indeed inscribed on the original stone but overlooked?) used the number 5 as a multiple times salary that gives the amount of maximum insurance on a keyman. Other rules emerged in years to follow as court cases and insurable interest and financial justification questions sent underwriters back to the stones for inspiration and carved in stone rules.

The ten times salary for personal insurance, common right up to the 70’s, was replaced by multiples that varied by age ranging from 10 times at young ages to 5 times at elderly ages. In the prime earning years, which was defined differently for every company, the multiple may have been 25 times. With business insurance the keyman rule more or less survived at 5 until the advent of Internet stocks and stock options. Now we just guess at what the keyperson is worth to the budding enterprise, all the while praying it is a legitimate venture and the numbers are not grossly inflated by speculators. The decades have seen the original stone tablets edited and enlarged as underwriters have been forced into responding to demands of regulators, legislators, Boards and CEO’s to “make sure we are never as a company in the press or courts for issuing too much insurance and it becomes “the motive for murder”. See the history of insurance in Canada and USA for cases like Demeter, Mullendore, Johnson, Smith, et al.

What we have as we end the 20th century is the underwriter being told to hold the line on overinsurance and speculation by staying as close to the old axiom of “No one should be worth more dead than alive!” At the same precise time the financial adviser team is being told to sell as much as you can. Do not worry about the amount on some of the modern super plans that use creativity to effectively create wealth to the point sales now target doubling the financially well off estate with something as inevitable as death. The underwriter says the sum assured according to its company’s rules is $X while the marketing department encourages $2X+$Y. Illustration systems can paint a picture of an after death (perhaps even near death) estate that is hundreds of millions; half of which was for protection of existing real estate issues while the other half is because everyone would like their offspring to have twice as much just to remember the deceased was a magnanimous person.

Recently a small group of wise underwriters joined together via teleconferencing to listen to an even wiser brokerage owner and financial team describe today’s products and how to utilize them to protect estate and increase estate. The underwriting group was eager to find out how to understand where the amounts were coming from and how to justify changing the age-old rules. The brokerage team wanted to impress upon the underwriters the background to rid the industry of financial declines because some underwriter said no. The “no” was being portrayed as the only answer forthcoming from the reinsurers. The presentation was very well done, informal yet pointed, and had a sincerity to it that made the underwriters sympathetic.

The conclusion reached was that the insurance companies must rid their offices of two hymnbooks and replace them with a text devoid of any reference to financial underwriting. If the senior officers and their boards want to throw the financial underwriting premises out the door and remove the mandate that underwriters must purge the files that represent overinsurance (using the aforementioned tables or multiples) and “worth more dead than alive” it is their prerogative. It would make underwriting easier, improve relations between producer and underwriter and add far more premium dollars to the top line.

As it stands today to counter pressure from sales underwriters are inventing new rules or as some would say “we are being told of the new rules by senior sales officers”. One such rule recently discussed and perhaps instituted was that for personal insurance a person should be allowed up to the total of 16 times gross yearly income plus 6 times net worth plus $1,000,000. The latter amount is strictly to add a liberal sizzle to the formula! I think this latest formula has about the same impact as not doing any financial underwriting but allows the underwriter the satisfaction of reading 723 pages of financial evidence.

Copies of this revised hymnbook are available somewhere but I am not sure if they are only available in brown bags and to be used secretly away from the eyes of the operating officers. Those officers still want to make sure they are not knowingly allowing their money to be the reward for murder — the real dollar cost pales in comparison to the adverse publicity.

Growing up as a young healthy boy in Southern Ontario I had a passion for the finding the best knockers. They were not always easy to find and only the keen well trained eye could spot them either hanging around or lying right there at our feet. It was only as I matured into the late pre teens that I realized size was not the only criteria for winning the battle of the knockers or conkers as many a city folk called them. (Note: Conkers being derived colloquially from the word conk which means to hit on the head)

Why are they doomed? It is not for the lack of chestnut trees but rather the ever spreading morass of rules and regulations meant to keep us and our children safe from harm or these weapons of mass destruction. On a recent trip to the UK my wife’s relatives broke the sad news to me. It was now against the rules and regulations of UK society in most areas to play with knockers or conkers (you pick the word that best describes your nuts). The UK law makers believe it is unwise and thus unsafe to play with conkers for in battle pieces of the chestnut may fly off and puncture the player’s eye. Since it would be impossible to enforce the other option, making safety glasses mandatory for all youths playing with congers, we just banned congers and knockers.

Doomed like so many dangerous escapades of the youth. No longer could a youngster search for the perfect chestnut to be transformed with a simple but minimalist hole through it and a string attached into a weapon of mass destruction. Size did not really matter as the mid size, very firm, and less pulpy chestnut actually ruled over the big soft knocker. Ah, we do want to make this world a safer place. Doomed is the fun of conker versus conker in a battle to the finish. The upside is that there are more for the street chestnut vendors.

Not that I ever put HP Sauce on my chestnuts but I have used a lot of the brown liquid on everything from steaks to sausage rolls. HP Sauce to me was an icon of British taste. Once the Brits had cooked the flavour out of the meat the only thing redeeming was the fact the meat retained the ability to transport ever so effectively the HP Sauce to one’s mouth. It was and still is a great sauce. Many a savoury garnish has come and gone but the HP has never lost its favoured or should that be flavoured status. Now the Birmingham plant that produces the entire HP is closing and the sauce’s blending and bottling are moving to the European continent where Heinz feels the economies of production are better.

Everyone seems to be in a frenzy to change the decisions of learned men and women who see HP as just a food product and not as an icon of Britain. Will this mean the House of Parliament on the label will be replaced by some Dutch icon? Will the waters of Holland have the same chemistry as the waters of Birmingham? Since many see HP as synonymous with House of Parliament will the name change to EU Sauce? From my relatives to the highest ministers in Britain the uproar grows but sadly most deep down one cannot stop the mega corporations from doing their thing. Years from now, should the protests fail to garner Heinz’s reversal of policy, will we have forgotten HP as we pour EU all over our succulent steak?

After the loss of the conkers and knockers what is the mere loss of a sauce? A lot as these are all cumulative actions of the modern human and play havoc with the older generation. I can only hope the taste remains the same and the tears of 125 workers in Birmingham do not taint THE brown sauce passionately labelled HP. Sally and David please put some last bottles of Birmingham’s finest for my next visit.

Makes all the changes in the insurance industry pale in comparison. What could be more important than outlawed knockers and where a sauce is made?

Steve made some very good points about the time available to make a good impression on an underwriter, which may mean the difference between standard and decline (okay so the difference may only be standard to +50 extra mortality). Any reader can tell Steve’s insight into how insurers work comes from his fundamental training as an underwriter. Unfortunately he left that profession for the more financially rewarding world of sales.

I would like to bring Steve’s numbers up to date since the cozy environment of underwriting as perceived by the hard working financial planner/broker has changed somewhat. As we enter the year 2000 underwriters work about 200 days in a year (the balance go to training, bathroom breaks, exotic seminars and conferences, holidays, weekends occasionally, long lunch hours, and psychic leave of absences, etc). Being less than generous they toil for about 8 solid hours per day and each of those hours has 60 minutes. That culminates in 96000 minutes of extreme pressure filled minutes to handle the proverbial “X” number of new applications. In Steve’s days of underwriting the net number was the same but the conspicuous consumption was more impeding to work day frustration.

Companies today have different expectations for number of cases per underwriter per year or per day. The higher the premium and/or sum assured the lower the expectation. Complex joint lives written for estate protection require more time than the mortgage protection policy for a small townhouse. Therefore in Canada we have underwriters who have a yearly case load of 1000 and some who have a caseload of 4000. Lots of the former but no examples of the latter comes to mine (more reassurance on former than latter).

In the case of the 1000 new cases per underwriter a case gets 96 minutes on average in the focus of the underwriter. That is lots of time to read financial statements for the past five years, six attending physicians statements, two medicals, one treadmill ECG, two laboratory test results, and the occasional well written descriptive letter from the broker. A little over an hour and one half to pass judgement on what could be the culmination of 12 months of effort by the broker. Less than one sixth of a working day to say yea or nee to the brokers best customer and many mortgage payments. That’s $60.94 plus burden rate to be forever classed as an obstructionist or a real team player.

In the other extreme of 4000 cases per year we have 24 minutes per case, less than one half hour, less than $20.32 per case or not much time at all.

Automation is helping move many cases through the system. If the broker/agent has properly and completely filled in the application and the person reviewing or inputting to a machine makes no error the decision is made in nanoseconds.

Steve the 7 and ½ has to be updated unless you count the cases screened by machine or simplified issue. The point however remains the same regardless of perspective. The very first impression can make or break a potential policy application. Just think how complicated and outrageously convoluted it gets when that same underwriter has to use some of their 96 minutes to arrange for many reinsurance underwriters to grasp what the sale is for and agree that the case is a standard risk!