Chapter 4 - Preferred Risk Underwriting

Question 1

What was the goal of the Framingham Heart Study?

Answer 1

To identify risk factors for CAD

Question 2

What did volunteers of Framingham study agree to?

Answer 2

They had an initial exam (to include med hx, physical measurements such as height, weight, and BP, resting EKG, chest x-ray, and blood chemistries). They are re-examined every 2 years.

Question 3

When did preferred product offerings sweep the industry?

Answer 3

Late 1980s and early 1990s

Question 4

What is the goal of multivariate regression?

Answer 4

To separate out and quantify the influence of each risk factor according to its own independent contribution to risk.

Question 5

How should underwriters think of weights in equations?

Answer 5

As the correct number of debits or points assigned to a variable

Question 6

What does a hazard ratio (HR) of 1.0 mean?

Answer 6

No change in risk from the referent baseline (1 = 100%). If HR ratio > 1, it is like an underwriting debit. If < 1, like a credit

Question 7

What is a dependent variable?

Answer 7

The target variable of interest (such as heart disease in the Framingham study)

Question 8

How are Cox regression coefficients reported?

Answer 8

Over base “e” so if coefficient is reported as 0.14, this means e^0.14

Question 9

How do you convert a Cox coefficient to an HR?

Answer 9

in Excel, you type =exp( ) and put the coefficient in parentheses

Question 10

How do you convert an HR into a coefficient?

Answer 10

use formula =ln( ) and put the HR in the parentheses

Question 11

How to measure HR for a 2 unit change?
Ex: Coefficient of chol is 0.14 and there is a 2 unit change in chol. What is the HR?

Answer 11

0.14*2 = 0.28 ——> =exp(0.28) = 1.32 HR
Or you can just use the unit change # as an exponent. HR using 0.14 in exp(0.14) is 1.15. 1.15^2 is 1.32

Question 12

What are the two preferred risk stratification models?

Answer 12

Point system and knock-out system

Question 13

How does the point system work?

Answer 13

All risk factors are assigned points and summed, the lower the number the better the risk

Question 14

Which preferred risk model is superior?

Answer 14

The point system

Question 15

How does the knock out system work?

Answer 15

Preferred criteria are a series of rules associated with each factor, and if the PI does not meet the criteria, they are knocked out of the the preferred class

Question 16

What issue does the knock out criteria raise?

Answer 16

Applicants who meet all preferred criteria except one are kept out of preferred because the good factors cannot offset the one unfavorable factor

Question 17

What product is more likely to have more preferred classes: investment oriented product or term product?

Answer 17

Term product

Question 18

What are the primary risk factors for developing CAD according to the Framingham study?

Answer 18

Age, sex, BP, cholesterol, HDL, diabetes, LVH on resting EKG, and smoking.

Question 19

Prominent preferred criteria

Answer 19

1) BP
2) Total cholesterol
3) Chol/HDL ratio
4) Build
5) Driving
6) Hazardous avocations
7) Occupations
8) Criminal hx
9) Personam medical hx
10) Family hx
11) Drug and alcohol usage
12) Treatment (some companies do not allow treated HTN on PFD for example)

Question 20

What is a limitation of historical assumptions used in setting preferred risk factors?

Answer 20

They generally apply to middle aged applicants and less to younger and older ones