Advanced Life Underwriting

Advanced life underwriting is a term for the most complex forms of life insurance underwriting. It typically involves the creation of policies for wealthy individuals with an unusual variety of assets and tax consequences or businesses insuring a large number of employees in a wide range of life situations.

Advanced life underwriting describes the underwriting process that is necessary for individuals with complex financial profiles and businesses seeking to insure groups of such employees. It does not describe any particular certification, but underwriters involved in this portion of the insurance industry have formed a trade association, the Association of Advanced Life Underwriters.

Underwriting is the process of determining the risk that a potential policyholder poses to an insurance company. The insurance carrier collects information about the customer's health and lifestyle to assess the likelihood that the customer will pass away during the policy’s term. This information ranges from a blood test to determine the probability of heart or other major disease to a summary of the applicant’s driving record. Each insurance carrier uses its own underwriting manual to evaluate the various risk factors. Finally, the underwriter considers any preventative steps the applicant may be taking and treats these as credits against the risks revealed by their application and medical exams. Once these risks and credits are weighed against each other, the underwriter and insurance carrier offer the applicant a policy at a premium that they feel covers their risk.

Advanced underwriting is an assessment of similar risks and credits drawn from a far more complex set of variables and financial considerations. The term often applies to the underwriting of numerous such policies as part of a package, such as for a team of executives at one company. Technology is assisting carriers’ abilities to handle these cases in two ways. First, automated underwriting is increasingly able to handle activation and administration of a large number of standard cases. Second, improved analytics are assisting underwriters in tackling the complexities of advanced underwriting.

Advanced underwriting for wealthy individuals and families allows those individuals to construct life insurance portfolios around objectives particular to that class of policyholder: asset preservation, wealth transfer and business succession planning. Life insurance can be a useful tool in meeting these goals, as it can be structured to minimize tax and preserve complex and unusual assets while passing them on to successive generations. Doing so requires an underwriter with particular expertise in such matters.