P R E F E R R E D U N D E R W R I T I N G GUIDE Table of Contents Introduction...2 The Underwriting Categories...2 Medical Requirements...2 Individuals Under Age 18 and Face Amounts Under $100,000...3 Highlights of the Underwriting Categories...3 What Does This Mean To You?...4 Estimating a Client s Underwriting Category...4 Setting Realistic Expectations...8 Preparing Your Clients for the Underwriting Phone Call...8 Preparing Your Clients for the Paramedic Exam...8 Policy Delivery...9 Notification of Underwriting Change...9 Converting Term Policies or Riders other than Term Elite or Term Essential to Permanent Policies...10 Converting a Term Elite or Term Essential Policy to a Permanent Policy with the Same Underwriting Categories...11 Questions and Answers...11 Summary...11 Where To Go For Help...12 Support Tools...12 2010 The Prudential Insurance Company of America, Newark, NJ 0165635-00002-00 Ed. 09/2010 Exp. 02/2012
P R E F E R R E D U N D E R W R I T I N G Introduction Prudential offers six underwriting categories on all our individual and survivorship policies (except 3 Year Non-Renewable, Non-Convertible Term and 3 Year Joint Non-Renewable, Non-Convertible Term) for insureds age 18 and over at face amounts of $100,000 or more. The criteria used to determine which of these underwriting categories will apply is based on specific health and lifestyle characteristics. The criteria, such as tobacco use, build, blood pressure, cholesterol, recreational activities and driving history, will allow Prudential to more accurately classify clients and price risk categories appropriately. The Underwriting Categories The underwriting categories are listed below: Non-Smoker Preferred Best Preferred Non-Tobacco Non-Smoker Plus Non-Smoker* Smoker Preferred Smoker Smoker* *Substandard table ratings, Classes A through H (A-S for survivorship), permanent flat extras (OCC ratings), aviation extras and temporary extra premiums are available with these two categories only. Permanent flat extras, which are applied for hazardous avocations or foreign travel, are also available in the Non-Smoker Plus category. Underwriting Requirements These requirements include an exam and a complete blood test and urinalysis for all individuals age 18 and over. A motor vehicle report will also be required for individuals age 18 to 40 and over 75. Data Verification Reports and electrocardiograms (ECGs) may be required depending on the proposed insured s age, general health and the amount of insurance applied for. The Preferred Underwriting Highlighter (0162521) and the Preferred Underwriting Estimator (0162528) contain a chart which details these requirements. 2
Individuals Under Age 18 and Face Amounts Under $100,000 Individuals under age 18 and applications under $100,000 are not eligible for Preferred Underwriting. The underwriting categories for individuals under age 18 and amounts less than $100,000 are listed below: Ages 0-14 Non-Smoker Ages 15-17 Non-Smoker or Smoker Substandard classifications are still available. Highlights of the Underwriting Categories Preferred Best: Our best underwriting category for applicants with no tobacco or nicotine use within the past 5 years, no hazardous occupations or avocations, and no substandard ratings of any kind. Applicants are subject to blood pressure, cholesterol, height and weight limits and must be in excellent health. Preferred Non-Tobacco: Our second best underwriting category for applicants with no tobacco or nicotine use within the past 3 years, no hazardous occupations or ratable avocations, and no substandard ratings of any kind. Applicants are subject to more liberal blood pressure and cholesterol limits than Preferred Best and must be in very good health. Non-Smoker Plus: Applicants may smoke cigars, pipes or chew tobacco, however, no cigarette use within the past 12 months is permitted. They must be in good health with no hazardous occupational duties. Ratings for avocation and foreign travel are permitted in this category. Applicants are subject to more liberal blood pressure and cholesterol limits than those permitted under Preferred Non-Tobacco. Non-Smoker: Applicants for this category may smoke cigars, pipes or chew tobacco, however, no cigarette use within the past 12 months is permitted. All other criteria will be evaluated independently. Applicants can either be unrated or have a series of substandard ratings such as Special Class ratings, Temporary Extras, Aviation ratings, etc. Preferred Smoker: The requirements are the same as those for Preferred Non- Tobacco with the exception of the smoking criteria. Applicants may currently smoke or have smoked cigarettes within the last 12 months. Similar to the Preferred Non- Tobacco criteria, they must be in very good health (i.e. healthy smoker ). Smoker: Applicants may smoke cigarettes currently or within the last 12 months. All other criteria will be evaluated independently. Applicants can either be unrated or have a series of substandard ratings such as Special Class ratings, Temporary Extras, Aviation ratings, etc. Exercise: Review the criteria for each category in the Preferred Underwriting Highlighter (0162521) and become familiar with the list of hazardous occupations and avocations, and Physical Measurements (Build Table). 3
What Does This Mean to You? You will have to ask your clients some basic health and lifestyle questions in order to more accurately provide a ballpark category and premium. It will be a ballpark category because under this criteria, the client s exact category cannot be determined until the underwriting process is complete. Information such as actual blood pressure and cholesterol cannot be obtained at point of sale. It is important that your clients understand that the quote you give them is only an estimate and not a guarantee of what their actual rate will be. Estimating a Client s Underwriting Category The Preferred Underwriting Estimator is a useful tool in estimating a client s underwriting category. By asking the client a series of yes and no questions, you can follow the arrows to come up with an estimate of the underwriting category. 4
Exercise Now that you have an overview, let s take a closer look at the actual criteria. Using your Preferred Underwriting Estimator and the criteria below, provide an estimated underwriting category for the clients shown below: Exercise #1a Male age 35 Smoking Occupation Non-Smoker Blood Pressure 135/83 Sales Manager Cholesterol Cholesterol/HDL ratio 5.8 Physical Measurements Family History Personal History Alcohol/Drug History Driving Record Aviation Avocation Travel 5 11 175 lbs Father died of cancer at age 57; Mother still living No History No History 2 speeding tickets within the last 3 years none scuba dives up to 30 feet island vacations 3 times per year Estimated Underwriting category answer: Preferred Non-Tobacco Discussion If you determined Preferred Non-Tobacco, you are correct. In this example, his family history keeps him out of Preferred Best because one parent died prior to age 60. In some cases, scuba diving beyond a certain depth may require an occupational rating. In this case, because he scuba dives less than 100 feet, no additional ratings are required. 5
Exercise #1b Assuming this same 35 year old is applying for $250,000 of life insurance, what are his medical requirements? (Check all that apply). You will need to refer to your Preferred Underwriting Highlighter for this exercise. Paramed Exam MD Exam Blood Test Urinalysis MVR ECG Data Verification Report answer: Preferred Smoker answer: paramed exam; blood test; urinalysis; MVR Exercise #2a Female age 45 Smoking Cigarette Smoker Occupation Accountant Blood Pressure 135/85 with medication Cholesterol Cholesterol/HDL ratio: 5 Physical Measurements 5 2 135 lbs Family History mother has high blood pressure; father died at age 70 due to complications from Diabetes. Personal History on medication for high blood pressure Alcohol/Drug History no history Driving Record no history Aviation no history Avocation no history Travel to Europe for business twice a year Estimated Underwriting category 6
Discussion Based on the information provided, it looks like this client would qualify for Preferred Smoker. She is a cigarette smoker, but otherwise in good health. One important flag is that her blood pressure is at the maximum allowable for this category with medication. It is possible that her actual blood pressure reading may be slightly higher at the time of underwriting. It is recommended that you prepare her for the possibility that she may fall into the Smoker category and quote her premium accordingly. Tip: If you are unsure of the category a client may be in, always quote a more conservative underwriting category. Remember, additional information may be uncovered during the underwriting process that may cause the client to fall into a different category. Exercise #2b Assuming this client was applying for $500,000 of life insurance using EA or the Life Xpress Process, what are her medical requirements? (Check all that apply). Refer to your Preferred Underwriting Highlighter to complete this exercise. Paramed Exam MD Exam Blood Test Urinalysis MVR ECG Chest X-Ray Data Verification Report answer: paramed exam; Blood Test; urinalysis 7
Setting Realistic Expectations When you do this with clients, you may learn that it is best to be conservative so as not to set unrealistic expectations. Obviously you want to get the best premiums for your client, but as you can see from the previous examples, there are many situations in which you will not have the information you need to properly categorize a client. Setting realistic expectations is your best approach. If the actual category is different than you estimated, you ll find people are more receptive if they are prepared for this possibility. Note: As with all client notes, any information you collect to make your estimated underwriting category determination, even if written on scratch paper, must be retained in your client folder. Refer to Documentation Retention guidelines for additional information. Preparing Your Clients for the Underwriting Phone Call In order to help prepare your clients for the Underwriting process, you should provide them with a copy of the Your Personal Profile brochure (0173753). This brochure includes a section which explains what underwriting is and why it is important. This will help you position the interviewer process with your clients. It also contains a list of the questions the underwriter will ask during the phone call with a place to record responses. Recommend that your client record his or her answers on this brochure prior to the phone call to ensure the information is readily available when needed. Preparing Your Clients for the Paramedic Exam Just as it is important to prepare your clients for the underwriting phone call, it is important for them to understand what will happen during the paramedic exam. Our customer satisfaction studies show that customers are highly satisfied in nearly 90% of the cases when they have been adequately prepared for the underwriting process and understand what is expected of them. For insureds age 18 and over applying for face amounts of $100,000 or more, your clients will be required to have a paramedic exam. The paramedic examiner will contact your client to set an appointment for this visit. He or she will come to your client s place of business or residence. The examiner will weigh and measure the proposed insured, take his or her blood pressure and pulse and obtain a blood and urine sample. 8
Preparing Your Clients for the Paramedic Exam (continued) The Your Personal Profile brochure provides some information about what your client can expect during the exam. Make sure to point this out to your client and check off the requirements that apply. In cases where a paper application is used, the examiner will also ask the questions that appear on the application. (For EA and Life Express Cases, these questions are asked during the underwriting phone call.) Note: MD exams may be required at older ages or high face amounts. The results of this visit are sent back to the underwriting department and are evaluated in determining the client s actual underwriting category. The actual underwriting category is not determined until after the complete underwriting evaluation. Policy Delivery When you get the client s policy, make sure to review it before delivery. Check to make sure the information is accurate and it is what the client applied for. It is your responsibility to contact underwriting if the policy does not accurately represent the client s profile (i.e., if it is issued non-smoker and you know your client smokes cigarettes). You will also want to check if the underwriting category is what you presented to the client. Refer to the Policy Delivery Guidelines. Notification of Underwriting Change If the insured s policy is issued with a different underwriting category than you originally quoted, but still within the six unrated categories, a notification will be sent to you. This notification will state what the underwriting category is, with a brief description of why the insured falls in that category (e.g. blood pressure or cholesterol levels, etc.) For example, if you originally quoted Non-Smoker Plus and the client received the Non-Smoker category due to the results of the blood pressure reading, the notification will explain that the blood pressure did not meet the criteria for the underwriting category quoted. Inevitably your client will ask why he or she did not get the better rate. This information will help you give the client a general idea of why he/she did not qualify for the category you initially discussed. If the client receives a substandard rating (A-H), a modification letter will be sent to you and the client. 9
Converting Term Policies or Riders Other than Term Elite or Term Essential to Permanent Policies Under contractual term conversions, the insured converts a term policy/rider to a permanent policy without requiring evidence of insurability or undergoing additional underwriting. Insureds will be able to convert their old term policies or riders to permanent life insurance products which have the preferred underwriting categories (when available.) The underwriting categories (classes) on the new policies will be equivalent to the underwriting categories (classes) on the original term policies or riders. Insureds who have a substandard underwriting rating (A-H) will only be able to convert contractually to an underwriting category (class) which offers substandard ratings (Smoker and Non-Smoker.) The following chart indicates the underwriting category (or class) an insured would get when converting an existing term product to a new product in a contractual term conversion. Convert from a product with: Non-Smoker Select Preferred Select Preferred (A-H) Preferred Preferred (A-H) Preferred Best Preferred Plus Preferred Plus Smoker Preferred Non-Smoker Select Standard Select Standard (A-H) Standard Standard (A-H) Smoker GIB Smoker Rated GIB Non-Smoker Rated GIB Smoker Non-Rated GIB Non-Smoker Non-Rated Convert to a product with: No Change Non-Smoker Plus Non-Smoker (A-H) Non-Smoker Non-Smoker (A-H) No Change Preferred Non-Tobacco Preferred Smoker Non-Smoker Plus Smoker Smoker (A-H) Smoker Smoker (A-H) No Change Smoker D Non-Smoker D Smoker Non-Smoker For term conversions to an amount greater than the guaranteed convertible amount, (Non-Contractual Conversion), the Underwriting Criteria (age and amount medical requirements) will apply to the entire amount of the new policy. Previously evidence of insurability was only required for the amount above the guaranteed convertible amount. 10
Converting a Term Elite or Term Essential Policy to a Permanent Policy with the Same Underwriting Categories Questions and Answers Summary Insureds may be able to convert their Term Elite or Term Essential policy to a permanent life insurance policy with the same underwriting category as the original* unless the amount of the new policy, or the age of the insured prohibits the under writing category. Question: If a client has not smoked in 4 years, he/she will not qualify for Preferred Best. Can the client reapply next year, at which time he or she will not have smoked in 5 years, in an attempt to get Preferred Best Rates? If so, what is the procedure for doing this? Answer: At the first policy anniversary, Prudential will permit reductions on policies in the Preferred Smoker and Smoker categories to Non-Smoker, if they continue not to smoke or use tobacco products. After the second policy anniversary further reductions for reasons other than tobacco use (i.e. driving record, blood pressure readings, etc.) may be allowed subject to full underwriting. Question: If a client had a physical or check up by their personal physician within the past 30 days, can he or she use these readings/results for underwriting purposes? Answer: No, the exam will still be required. However, in some situations, the doctor s records will also be obtained. Question: If a client missed the Preferred Best category because their blood pressure ratings were off by a few numbers (i.e.132/80), could he or she still get Preferred Best ratings? Answer: Adherence to the criteria is critical if Prudential is to maintain the mortality and pricing expectations for the products. Question: What should I do if I believe that Underwriting really did make a mistake on my client s rating? Answer: It is your responsibility to review the policy before delivering it to the client. Make sure it represents what you know about the client. If you feel it is inaccurate, contact Underwriting. Of the six categories, two are for non-nicotine, non-tobacco users in great health (Preferred Best and Preferred Non-Tobacco), two are for cigarette smokers (Preferred Smoker and Smoker), and two are for individuals who smoke cigars, pipes or chew tobacco (Non-Smoker Plus and Smoker.) Four of the six unrated categories will be considered Preferred Risk categories and will offer individuals our best possible rates based on their health and lifestyle characteristics. A preferred risk is a healthy individual, age 18 or older who meets certain specific health criteria and is not exposed to any hazardous lifestyle characteristics. Substandard ratings and aviation extras are not available with the Preferred Risk categories. They are available only with Smoker and Non-Smoker categories. Individuals under 18 years of age and individuals applying for less than $100,000 of life insurance, will be eligible for Non-Smoker or Smoker categories only. (Special rating classes A-H may also be available.) *Conversions from policies with a Preferred Plus underwriting category would convert to a Preferred Non-Tobacco underwriting category and policies with a Preferred Plus Smoker underwriting category would convert to the Preferred Smoker underwriting category. 11
Where To Go For Help If you have any questions regarding Preferred Underwriting, you may contact your Life New Business area. Support Tools Prudential s Preferred Underwriting Estimator (0162528) Preferred Underwriting Highlighter (0162521) Medical Underwriting Highlighter (0166282) Substandard Underwriting Highlighter (0154766) Financial Underwriting Highlighter (0163802) Last Expense Underwriting Highlighter (0166257) Underwriting Cover Letter Highlighter (0166243) Membership promotes ethical market conduct for individual life insurance, long-term care and annuities. Rates and availability will vary based on the satisfaction of our underwriting criteria. Underwriting rules are subject to change at our discretion. Term Essential and Term Elite are issued by Pruco Life Insurance Company in all states except New York, where they are issued by Pruco Life Insurance Company of New Jersey. Other insurance policies are issued by The Prudential Insurance Company of America and its affiliates. All are Prudential Financial companies located at 213 Washington Street, Newark, NJ 07102. Each is solely responsible for its own financial condition and contractual obligations. Prudential, the Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities. 2010 The Prudential Insurance Company of America 751 Broad Street, Newark, NJ 07102-3777 www.prudential.com ALL RIGHTS RESERVED