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    A Life Insurance Actuary's Guide to
    Term Life Insurance Quote Sites*

    by Norlyn Dimmitt, FSA, Founder of ExamFirst                                  
    About ExamFirst

    SUMMARY

    In this article I compare the three term life insurance quote sites with the most accurate term life insurance quotes (InsuranceGuide, InsWeb.com, and InsureMarket.com) on four criteria -- quote accuracy, carrier selection, misquote handling, and website ease of use. InsuranceGuide. wins hands down on all four criteria.

    EVALUATION
    CRITERIA

    The two most important criteria (the criteria which will lead term life insurance buyers to the policy that is best for them) are: 

    (1) Quoting accuracy

    (2) Carrier selection

    Quoting accuracy is the degree that term life insurance quotes are geared to your actual risk profile. But accurate term life insurance quotes without carrier selection (i.e.., a number of competitive term life insurance companies) will still leave you wondering if there isn't a significantly better term life insurance policy for you out there.

    Other important criteria are:

    (3) Misquote handling

    Even with the most accurate quoting systems, misquotes occur (because you often don't know your cholesterol level or ratio, or any number of other exam results in advance -- what a backward system!)

    If you end up not qualifying for the rate you were initially quoted, and discover a better rate with another company (by rerunning a quote armed with your exam results), you will want to be sure that you don't have to start all over with a new agent. This is a good reason to work with a broker who works with many companies, rather than an agent that only represents one or two.

    4) Ease of use

    Don't be misled by quote systems that only ask age, sex, and smoker status before quoting you. The fact is, a lot of risk variables are considered by companies, and if you are serious about buying a policy, then you may as well answer the most important health questions up front (and get as accurate a quote as possible).

    The above four criteria are the ones I focus on when comparing the three most accurate quoting sites that I've encountered thus far -- InsWeb, InsureMarket, and InsuranceGuide.

    Criteria #1:
    Quote Accuracy

    Rather than inundate the reader with a detailed discussion of the myriad underwriting variables that are looked at when classifying risk, I'm going to confine myself to the 5 variables that come into play most often, for term buyers who are standard or better. These variables are:

    (1) Build (Height/weight)
    (2) Cholesterol (Level/ratio; medication)
    (3) Blood Pressure (systolic/diastolic; meds)
    (4) Family History
    (5) Driving record

    No current online quote system works well for substandard or impaired risk cases (even impaired risks like asthma or controlled diabetes that are standard in many cases). A lot of the questions that all three sites under review ask are geared to throwing out cases that require individual attention (each has a long list of impairments from epilepsy to hypertension, none of which I will discuss).

    BUILD

    All three sites include build (height/weight) in their calculations, so there is nothing to compare. However, it is worth noting that 15% of all misquotes are a result of incorrectly entered height/weight information. Many people underestimate their weight -- what matters here, as with all exam results, is what the paramedical examiner and laboratory say. This is a very important point in my larger enterprise, because it calls attention to the great value of allowing life insurance applicants to be examined BEFORE they get quoted. This is the ONLY way to assure that they are selecting the right company and policy for their risk profile.

    CHOLESTEROL

    Cholesterol is the risk factor that causes 37% of all misquotes (according to one medium-scale study.) Clearly getting this risk factor right is very important for accurate quoting. Getting the cholestrol factor right means asking about cholestrol level, colestrol ratio and about treatment and diagnosis.

    InsWeb asks only about cholesterol level, ignoring cholesterol ratio. But the only time they are asked about cholesterol level is when the applicant admits to treatment or diagnosis in a section that most people don't read carefully especially if they consider themselves healthy.

    InsureMarket, like InsWeb, asks only for cholesterol level, ignoring ratio. (The John Doe example on the previous page clearly showed how important cholestrol ratio is.) Unlike InsWeb, InsureMarket doesn't ask a question about treatment or diagnosis.

    The rationale I've heard from representatives at both companies is that "no one knows the ratio and/or level". This is increasingly incorrect (more and more people can in fact enter a number here, and even if official insurance exam results may differ, an actual past reading is more accurate than no reading at all). Moreover, it is highly relevant to customers, after examination, to be able to requote themselves if their cholesterol level or ratio exceeds the limits on the originally applied-for quote.

    Only InsuranceGuide asks all the relevant questions on cholesterol -- level, ratio, and treatment/diagnosis. It is therefore the only one of my top 3 picks that has complete cholesterol quoting (and requoting) capability.

    [Requote capability is a theme I repeat ad nauseum in my writings, because even in the currently obsolete term delivery system, requote capability still empowers the customer. Few customers will trust the agent who encourages them to accept the higher rate offered by a carrier, when he insists that "that's the best you can do". This tendency to try and resell a misquoted case with the same carrier (to avoid the admittedly tedious task of applying elsewhere) is one of the most salient symptoms in an obsolete system, and everyone loses when half of all misquoted customers walk away in disgust. The original company will in fact still be the best rate in many cases, and customers may pick convenience over price in many other cases, but I believe emphatically that it should be the customers choice!]

    BLOOD PRESSURE

    As with Cholesterol, InsWeb only asks for blood pressure if the applicant has answered "yes" to the general treatment/diagnosis question on blood pressure.

    InsureMarket does a commendable job here, asking not only about treatment/diagnosis, but asking for particulars on systolic/diastolic readings. The only slight criticism I have, is that the menu input for systolic/diastolic pressure is in five point increments, and in fact many carriers have limits for risk classes that are not rounded to the nearest five.

    InsuranceGuide again takes top prize (if not so decisively as it did on the cholesterol variable). InsuranceGuide asks about treatment/diagnosis, and allows exact systolic/diastolic numbers to be input.

    FAMILY HISTORY and DRIVING RECORD

    All three sites address these, and evaluation of each site's treatment is a bit difficult to communicate without going into cumbersome detail. Suffice it to say that companies treat these items rather differently, and InsuranceGuide does the best job, once again, at covering the terrain. The impact of the differences between the sites, in terms of overall accuracy, is much less significant here than with cholesterol, so I don't want to overanalyze these variables.

    I'll simply point out two examples. First, companies use different age cut points in family history (60 is most common, but 50 and 70 are also used). InsuranceGuide is the only site that covers each cut point. Secondly, moving violations are analyzed over different time periods (1, 2, 3 years) and with different limits (1, 2 or 3 violations in the time period). Again, InsuranceGuide covers the terrain most completely.

    To summarize, on criteria #1, quote accuracy, InsuranceGuide is overwhelmingly superior, taking top honors on each of the most salient five underwriting criteria.

    Criteria #2:
    Carrier selection

    Any attempt to list the fifteen most competitive term companies is going to be challenged. Here is my clearly imperfect (but unbiased) list (in alphabetical order), followed by a brief discussion of how I derived the list.

    1. Banner Life
    2. CNA
    3. Empire General
    4. First Colony
    5. First Penn
    6
    . ING Direct
    7. John Hancock
    8.
    MONY
    9. North American
    10. Ohio National
    11.
    Old Republic
    12. Transamerica
    13. West Coast
    14.
    Western Southern
    15.
    Zurich Kemper


    InsuranceGuide: 6 companies (1, 3, 4, 5, 12, 13)
    InsWeb: 10 companies (2, 4, 6, 7, 8, 9, 10, 11, 14, 15)
    InsureMarket: 8 companies (2, 6, 7, 8, 10, 12, 14, 15)

    On my imperfect (but again, unbiased) sampling of top carriers, all three websites offer an incomplete, but complementary and reasonably broad selection of competitive companies.

    Now for my selection criteria. I primarily used Term4sale.com to derive my top 15 list. It is the most unbiased, comprehensive online quote site (Bob Barney doesn't sell policies OR leads). I added ING Direct, which is exceptionally competitive but which doesn't show up on Term4sale.com.

    I sacrificed perfection for ease of replication. I want readers to be able to verify my analysis for themselves, without having it take all day. To that end, I focused entirely on the top preferred class.

    While an accurate top ten would run a comprehensive sample of actual risk profiles through an accurate quote engine which had all companies, there is no such accurate quote system. And since criteria for less-than-best preferred classes vary widely, the only meaningful way to derive top carriers was to stick to the top class, "preferred plus". I realize that this is flawed -- I miss several companies that are very competitive for some risk profiles. But at the same time, it is unbiased (i.e., if you were able to flesh out my list, there is no logical reason to think that it would change my conclusion about InsuranceGuide having much better carrier selection).

    Anyway, the demographic cells were as follows:
    Male and female (equal representation)
    Smoker and Nonsmoker classes
    Ages 35, 45, 55
    duration 10, 15, 20, 30 (omitted 30 year for age 55)
    Face amount: $500,000

    I assigned scores of 5, 4, 3, 2, and 1 to the top 5 rankings in each cell.

    Criteria #3:
    Misquote handling

    If a term buyer ends up discovering for the first time that he or she has a high cholesterol level, and can qualify for a better rate with a different company, neither InsWeb nor InsureMarket will be able to handle the switch smoothly. That's because their relationships are primarily with direct fulfillment centers tied to specific companies. (Eg., an agent working exclusively for John Hancock has no incentive to move a client to another carrier). InsWeb and InsureMarket are not integrated, full service brokers. InsuranceGuide is, and that would be a good reason to go through them, even apart from their clear superiority in quote accuracy and carrier selection.

    Criteria #4:
    Ease of use

    Because InsWeb and InsureMarket invoke more graphics, and force the prospective term buyer to click through multiple pages, it takes 3 to 4 times as long to get a quote (on a 28.8 bps line, which is still prevalent), as compared to InsuranceGuide's no-nonsense, simple form. Moreover, InsuranceGuide displays all choices (5,10,15,20, and 30 year), whereas with InsWeb and InsureMarket, one has to run 5 quotes to get that choice matrix. Enough said.

    CONCLUSION

    On each of the above criteria, InsuranceGuide demonstrates a superiority to InsWeb and InsureMarket that belies the fact that InsuranceGuide's technology budget is relatively minuscule, in comparison to its well capitalized competitors. It seems that there is something to be said for having a deep grasp of the current term life insurance delivery process (warts and all), which David Phillips clearly does.

    No informed person doubts any longer that the internet will revolutionize the way we do business. Nowhere is this more true than in the delivery of term life insurance.

    In the not too distant future, term buyers will take their exam first, and then run the results through the full blown expert underwriting modules of numerous carriers. In a sense, they will bid their risk profiles out to competitive term companies, and choose from the offers that are returned. Such online customer empowerment is already being implemented for other financial services (eg., mortgage loans and automobile insurance).

    But other financial services don't require a fundamental paradigm shift -- to empower term buyers, companies must relinquish significant control over the underwriting process, and they will do so only when it becomes economically infeasible to cling any longer to an obsolete system. That day is not far off.

    * EDITOR'S NOTE: Some of the web sites chronicled here no longer exist. We maintain this article for its historical value. You can find a more recent site for life insurance quotes here. Another site, useful for researching life insurance companies is www.life-insurance-companies.com.