If your client has ever applied for life, disability, or long-term care insurance, there’s a good chance the underwriter saw something your client has never seen—and it might be inaccurate, misleading, or just plain wrong.  Welcome to the world of third-party underwriting data:  Prescription histories pulled from pharmacy benefit managers, claims summaries scraped from insurance carriers, and device codes matched to algorithms with no clinical context.

In theory, it’s all designed to streamline underwriting and reduce fraud.  In practice, it often flags outdated or misinterpreted information, like calling an InterStim device a pacemaker (instant decline), or turning a short course of anti-anxiety medication into a diagnosis of chronic depression (preferred to standard).  And here’s the kicker: your client has no idea.  Few in the advisory community—and even fewer consumers—know that prescription or claims-based scoring even exists.

They don’t know that information about their medical and prescription history may be accessed, without their knowledge and without their doctor ever having reviewed its accuracy.  They don’t know what’s in the report.  And they won’t understand why they were declined—unless you know to ask the right questions and proactively manage the process.

A Credit Score for Insurance — But Worse

Just like a FICO score predicts lending risk, there are algorithms attempting to predict health risk.  The difference?

• Your client didn’t authorize it knowingly.
• They can’t access it easily.
• They have no idea what their “score” is.
• And they can’t dispute any of it—unless they somehow discover it exists.

And here’s the part no one likes to say out loud:  Someone making $15 an hour, sitting at home watching cartoons, might be the one inputting your client’s data into the system.  No medical license, no judgment, no accountability….. Just getting paid to process as much data as possible in the shortest amount of time.  A poorly paid contractor assigning labels to data that will define your client’s future insurance eligibility — That entry, whether right or wrong, becomes the foundation of a consumer's underwriting decision.

They call it underwriting, but let’s be honest—this is automation masquerading as accuracy, and it leads to “surprise declines” and rate increases.  Not because a consumer lied, but because the data was flawed, leading to the wrong interpretation—inside a system that was built for speed, not truth.   You know the rule:  Good, Cheap, or Quick — you can’t have all three.  And the insurance industry chose quick and cheap.

Should This Data Be Managed Proactively—Like a Credit Report?

Absolutely. And the fact that it usually isn’t is part of the problem.  Just like savvy consumers pull their credit report before applying for a mortgage or car loan, your clients should request their medical claims report before applying for life, disability, or long-term care insurance.  The difference?  Credit bureaus are well-known, regulated, and monitored. 

Prescription and claims data operate quietly behind the scenes of the insurance industry, and most applicants have never even heard the name, let alone reviewed what’s being reported about them.  But make no mistake—this data can be accessed and reviewed.  Clients have a legal right under the Fair Credit Reporting Act (FCRA) to request a copy of the information being shared about them.

That report may include:

• Prescription drug history
• Inferred health conditions
• Claims-based utilization patterns
• Past underwriting flags or decisions

This review won’t include complete medical records, but it may prevent an underwriter from red-flagging something the client never disclosed—or didn’t even know was there.  That’s why proactive advisors may treat this like pulling a credit report:  Request it early, review it with the client, and address red flags before they derail an application.

Understanding the Process Is as Important as the Planning

It’s not enough to have a strategy if you don’t understand how the underwriting process works, because a carefully crafted insurance-based plan can fall apart before it ever gets implemented.  You can talk all day about funding options, tax strategies, or protecting retirement income—but if your client can’t get through underwriting due to flawed third-party data, none of that matters.

Too many professionals confuse product selection with actual planning.  They assume that if the client has assets, they’re insurable, or if the client is healthy enough to play golf, they’ll get approved.  They assume underwriting is fair, transparent, and rational.  Unfortunately, proper assessment of a client’s health isn’t simply whether they “look healthy” or that they’re a “non-smoker,” because that’s clearly less accurate than what the insurance companies use. A planning conversation for ANY insurance solution without understanding the underwriting process is irresponsible and reckless, because real planning means knowing: 

• What carriers look for behind the scenes
• What data is being pulled and how it’s interpreted
• How medications, device codes, and historical claims can quietly sabotage an application
• How to prepare clients for that reality in advance

Clients get declined all the time — even when they appear perfectly healthy — and all that planning is down the drain, leaving the advisor scrambling to pivot, justify, or explain why no one saw it coming.  Regardless of the client relationship, navigating the system, anticipating landmines, and making sure your client doesn’t get blindsided by a decision based on incomplete or inaccurate data.

Understanding the process separates planning from implementing, and too many advisors are uncomfortable asking “health” questions.  Why?  This isn’t brain surgery. The client isn’t going to bleed out on the conference room table, and no one ever fainted at the sight of a challenging question about health!   Let’s be clear: every client is going to die, and being squeamish about their mortality or morbidity is what you signed up for.  There is no “forever” plan, and ignoring or minimizing death is borderline negligent.

Accuracy Was Sacrificed for Speed — Don’t Let Your Clients Pay the Price

Somewhere along the way, the insurance industry made a choice:  Speed and cost-efficiency over accuracy and context.  What used to involve medical records, human underwriters, and professional judgment is now a rapid scan of third-party databases, automated scoring, and risk models built to make fast decisions, but not necessarily the correct ones.  It’s back to the previously mentioned tradeoff:  Good. Cheap. Quick… and you can pick two.

Modern underwriting is quick and cheap, but rarely classified as good.  What does that mean for your client?   It means they could be declined for a sprained ankle, classified as a chronic condition because the data entry contractor clicked the wrong dropdown after a pitcher of beer and wings for lunch at Hooters.  This is what we’re up against.

Maintaining credibility as a trusted advisor goes beyond building a plan; it requires knowing how the plan gets approved, or where the process goes sideways.   Because once that decline comes in, there’s rarely a “do-over” without disappointment, delay, and damage control.  After accuracy got traded for speed, don’t let your clients be the ones who pay for it.

This article reflects the author's professional opinion based on real-world experience in insurance and long-term care planning. All references to underwriting tools and data systems, including Milliman Claims Data & Intelliscript, are based on publicly available information and industry-standard practices. Readers are encouraged to consult directly with carriers or providers for specifics.

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