In the last ten years, life insurance applicants 80 and older have become a common occurrence. This historically unprecedented phenomenon in the life insurance industry reflects the impact of the "age-wave" that is reshaping the U.S. demographics. The good news is that this means an ever-growing stream of life insurance candidates with planning needs and the means to implement solutions. The bad news is that the 80 and older applicant comes with unique "risk assessment challenges" that can complicate or be the basis for denial of coverage. While most producers are familiar with normal medical problems of aging (i.e. heart disease, cancer, stroke, etc.), a much smaller number are well versed in "functional issues" that have a significant impact on the primary purpose of underwriting: predicting life expectancy (LE).

Up to age 80, LE is based predominately on past and current medical information. While life style, habits, occupation and avocation play an important part in determining insurability, it is the client’s "medical health" (derived from their medical records, life insurance examinations and other sources) that will form the basis for how long an underwriter assess the client will live. At 80, however, LE starts to be governed by more than the static facts of medical information. How these medical facts play out in the ability of a person to live their life (called functional ability) becomes of utmost underwriting concern. As important, at 80 the "quality" of a client’s functional ability may have a greater impact on LE than the mere presence or absence of medical problems.

This is not to say that medical health and functional ability are distinct and separate entities. They are not. They are interdependent and collectively determine not only the applicant’s insurability but provide a more complete picture of their true health. It is because of this interdependency that it is important for producers not to "assume" an older client is automatically insurable or uninsurable based simply on their medical history. A complete underwriting assessment of clients in this age group includes information on functional ability. Knowledge of a client’s functional ability provides producers with information that is not always obvious in the medical file of an applicant but can make the difference between getting a policy or getting a declination.

When most producers hear the term functional ability they immediately think of Activities of Daily Living (ADLs). ADLs are divided into the "basic" and "instrumental." The basic ones cover the fundamental tasks of living (walking, eating, using the bathroom, etc.) while instrumental ones cover more advanced living skills (i.e. driving, shopping, pay bills, etc.). While functional ability does include ADLs, it encompasses a much broader perspective of how the client is adapting to their environment in the face of aging. This "enhanced" overview for clients 80 and older is essential to the underwriting process of life insurance. It is "essential" because of the simple fact that functional ability cannot be predicted based on client’s medical history.

Consider the following example:

Client A is an 80 year-old female, non-smoker, who had a heart attack (myocardial infarction) three years ago with minimal heart damage. She also has a history of well-controlled high blood pressure on medication (Tenormin) and takes an aspirin a day.

Client B is an 80 year-old female, non-smoker who reports no significant health issues on her life insurance exam. She is currently taking Synthroid and Premarin daily.

Both Client A and Client B have fully intact basic and insturmental ADLs.

Most producers would assume that Client A is a higher risk for life insurance. Most producers would assume that Client A has a shorter LE than Client B. In the absence of meaningful functional ability information, that would be a reasonable conclusion. Now, let’s reconsider the LE of Client A and Client B based on more detailed functional ability information.

Client A has been a widow for over 10 years. She belongs to a senior center and attends exercise classes four times a week. She also goes on trips sponsored by the center which include hiking, sight seeing and cook outs. She volunteers at a local hospital two days a week and drives herself to these appointments. She is active in her church and attends many functions a month. She lives alone in a residence she has owned for over thirty years. She does her own shopping, cooking and manages her own finances.

Client B lost her husband less than a year ago. She still has her drives license but rarely drives herself. Her daughter, who manages her mother’s finances, also provides most of the transportation for shopping and "getting out." Client B lives alone and spends the majority of her time watching television. She does not volunteer in the community and does not attend religious services. Her interaction with her friends is usually when they stop by for a visit or on the telephone.

It appears that the heart attack has not slowed down Client A. But is also appears that Client B is, from a functional perspective, slowing down in many areas of her life. It would not be unreasonable to assume with this new information that Client A not only has the same LE as Client B but that Client A may have a longer LE!

It is important to remember that the most significant information about an applicant’s functional ability may not be contained in their medical file. For client’s 80 and over, it is not enough to simply get the APS and hope for a good offer. Producers must be knowledgeable of the appropriate functional ability questions and how to use them in the underwriting process. Unless the producer provides this information to the underwriter, the 80 year-old and older client may wind up being assessed from a "one-dimensional" underwriting perspective.

What are the crucial functional ability questions and observations that can assist an underwriter?

1. Regular physical fitness exercise is well documented to improve survival in older adults. It is important to ask about physical fitness exercise and carefully document the exact type and frequency. Client A despite having a previous mild heart attack, exercises at a senior center on a regular basis. Client B, despite the absence of significant medical problems, has a sedentary lifestyle.

2. Advanced ADLs need to be quantified to be of any value in the underwriting process. In the case of Client A and Client B, both had valid drivers licenses and both could answer "yes" to the question "do you still drive." But this is not enough information for underwriting purposes. Knowing that Client A was still a very active driver with numerous outing each week while Client B, was slowly surrendering her driving skills is the type of information that can be used to accurately assess the applicant’s true functional ability.

3. Volunteers at older ages have a lower risk of dying than non-volunteers. Client A’s volunteer activities not only demonstrated her driving abilities, it also indicated that she had a source of "productive engagement" in her life. Productive engagement, such as volunteering, has been shown to have just as much positive impact on mortality as physical fitness activities (Glass, T.A., Mendes de Leon, C., Marottoli, R.A., & Berkman, L.F. (1999). Population based study of social and productive activities as predictors of survival among elderly Americans. BMJ, 319, 478-483.). Take the time to find out if your older client is involved in these types of activities along with their frequency.

4. If the client has an active social life, don’t be afraid to be creative in reporting it. Client A has a very active social life. One way to present this type of information is to provide the underwriter with a spreadsheet of the client’s social calendar over a 30-day period. You may also consider obtaining a recent photo of the client at a charity event or social outing that offers the underwriter a chance to see the applicant successfully functioning in their social environment.

5. Be clear about who really does what in terms of financial matters. There is a big difference between the older adult who is presented "summaries" of financial issues by a son or daughter for approval and one who manages all aspects of their personal finances. Client A manages her own finances (i.e. pays bills, balances her checkbook, etc.). Client B, has her finances managed by her daughter.

6. Mobility may be the final key to insurability. This is an area that concerns underwriters when they look at an applicant 80 and older and for good cause. Poor mobility, namely problems with imbalance, muscle weakness and uneven gait, put a person a high risk for falls and their unpleasant outcomes. Providing information on the client’s mobility can be very helpful to an underwriter. It is best to describe the older client’s ability to "get around" in terms of their walking stamina (i.e. how far can the walk) and how well they negotiate stairs.