An analogy between stealing second base and insurance underwriting.
This article was featured on SportsEpreneur.com. You can find it here: “Stealing Second Base Is Worth the Risk, Sometimes“.
In baseball, a sport I have both played and coached, getting a runner from first to second is critical. Once they get to second, their chance of scoring goes way up. For just that reason, it’s that runner moving between first and second who everybody is trying to get out.
So, let’s say you have a runner on first base with one out. Your number-six hitter is up to bat. You have a solid base runner on first, but now it’s the bottom of the eighth inning, you have one out and your team is down one run. Should the runner on first try to steal second? With only five outs left in the game, you may need to take a chance—this could be the difference between winning and losing. But if it doesn’t work, you’ll be even farther in the hole. You have to think about how fast the pitcher can react, what the catcher’s reputation is for throwing runners out, and how good your runner is. It’s a lot to consider.
That is what underwriting a complicated life insurance case is like.
From financial issues to medical questions, to business practices to the insurance agent, to the client and his counsel… if this were a simple and easy decision, we could probably automate the entire process–in fact, when the answers are that easy, it often is automated, these days. But that’s a rarity. You need human judgment, and there is often more than one human being involved, so they might disagree, which further complicates the entire scenario.
So, do we accept this case, take the risk, knowing all of the different variables in play, from reinsurers, stockholders, management, foreign travel, health concerns, and so on? Or do we stand pat?
Do you steal second and risk having no one on base with two outs because you got aggressive? You could end up moving to the ninth inning still down a run. Make too many risky decisions, and the game could be over.
A good underwriter knows how to negotiate these decisions.