A preliminary inquiry is an informal inquiry made by an insurance advisor to an insurance company when the broker does not want to submit a formal application. Preliminary inquiries can be a great way to gauge a client’s rating or potential decline.
Having a decline on your record can greatly limit your insurance options, especially when applying for a no medical simplified issue policy. Many of the applications for this type of policy specifically ask if the applicant has been declined for life insurance within the past two years.
For example, someone with Type 2 diabetes or non-insulin dependent and 40 or more pounds overweight could be turned down for life insurance. A broker can prevent this by submitting a preliminary inquiry to see how the insurance company will respond. Will the client by approved, declined or subject to a substandard rate? Will the client face a super high premium? The insurance company can tell the broker approximately what kind of rating to expect.
Personal details, such as the name of the applicant are not required at this time so if the insurance company says the person will not likely be approved, a decline will not show up in the potential applicant’s record.
LSM insurance broker Jack Bendahan was recently interviewed by Investment Executive. Jack stated that when doing an inquiry, brokers should give the insurance company as much detail as possible without including the clients name.
Jack goes on to state that the preliminary inquiries not only benefit the client, but can save the broker a lot of hassles down the road. Working with hard-to-insure clients sometimes involves more work and doesn’t always end with favourable results.
That is one of the biggest advantages of a preliminary inquiry – to help hard-to-insure clients avoid a potential decline. This is especially important because even a single decline can make getting approval from another carrier considerably more difficult. After all, many simplified-issue policies include a question about whether the client has been declined for life insurance.
Jack recommends that clients who are likely to be declined first apply for a simplified-issue policy prior to applying for a regular life insurance policy. That way, if they’re not approved for the regular policy, they can maintain the simplified-issue coverage, which in many of these plans pays out on an immediate basis.
It’s important to remember that a preliminary inquiry is not a formal insurance offer. Once the official application is submitted, the client could still be declined. In most cases, this only happens when the information on the application doesn’t match that of the inquiry or if the applicant scored poorly on the medical tests.
It is vital for the broker to be as accurate and thorough as possible. Simply saying the person is diabetic or suffered a stroke in the past is not enough information for the insurance company to produce an accurate quote.
The company will need to know what type of diabetes and whether or not it is under control. Details about a stoke should include the type, the length of time the client spent in the hospital, recovery time, what, if any recurring symptoms, history of smoking, medications and treatments the client is currently taking or has taken in the past and any other health issues or conditions the applicant may have.
