Insurance cover letters don't need to be formal. They can even be written on a table napkin, one expert says.Frazao Studio Latino/iStockPhoto / Getty Images
Trevor Theobald often works for a year or more planning for the implementation of large-case insurance policies for estate planning, business buy-sell arrangements and intergenerational wealth planning.
So, when the time comes to apply, the financial planner with CWP Financial Services Inc. at Sun Life Financial Distributors (Canada) Inc. in Toronto does everything he can to ensure success. That includes writing a cover letter to accompany the application.
“Think of buying a 500-piece jigsaw puzzle, and then think of yourself trying to put that jigsaw puzzle together without being able to look at the picture on the box,” he says.
“What we’re trying to do by writing the cover letter to the underwriter is to help create the picture and make sense of the pieces inside the puzzle.”
Cover letters fill information gaps or provide context not captured within the insurance application itself, he says. That could be the rationale behind the face value, an explanation of why a client has no income at the moment (perhaps they’re on parental leave), or why they’ve seen a particular specialist in the past five years (their health condition is stable, but the client attends regular check-ups every two years, for example).
For an older client, Mr. Theobald might describe their commitment to living an active life and pursuing passions – from art and literature to word puzzles and number games. For a client with a close relative who had a concerning diagnosis, he may include a note about how the illness was treated and, if there was a good outcome, the relative’s long life.
Beyond strengthening individual applications, Mr. Theobald says cover letters can help advisors build a reputation with underwriters for delivering well-explained case files. And some insurers actively encourage cover letters with life insurance applications, especially for complex cases.
Karen Cutler, vice-president, head of underwriting and chief underwriter, individual insurance, at Manulife Financial Corp., recently wrote a blog post on the subject.
“Where we want to see these cover letters is in unique situations, or where there’s additional information that isn’t really asked in our application that would give some context,” she says.
She likes to get a “three-dimensional view” of the client’s story, their relationship with the advisor and why they’re seeking insurance, including how their needs have changed or will change in the future.
The key is to add to the story, rather than repeating information that’s already collected in the application.
And while detailed and extensive cover letters can be helpful when a case is especially complex, she says it’s often enough to highlight the most pertinent facts concisely in a bulleted list.
“I’ve told advisors in the past, ‘Look, it can be written on a table napkin. It doesn’t have to be formal. But get us the information you need to get us,’” Ms. Cutler says.
Asked if there’s a risk an advisor might include information in a cover letter that harms an application, she stresses that facts always help. The only risk she sees is the possibility that something will prompt a question – but she points out that handling any resulting back and forth gives advisors an opportunity to demonstrate they’re putting effort into ensuring clients get the coverage they need.
“Advisors who go the extra mile on a complex case, especially where there are health histories or unusual avocations or unusual financial situations, are the ones who are going to be more successful in getting these cases through the process … in an expedited fashion,” she adds.
Both Mr. Theobold and Ms. Cutler say there’s room for more advisors to use cover letters to support life insurance applications – particularly as it isn’t a widely used strategy.
Chantal Auger, national vice-president, brokerage network, individual insurance and financial services at Beneva Inc., says cover letters from financial advisors aren’t common practice, “but they can be highly valuable in specific situations – particularly for large or complex life insurance applications."
“A well-prepared cover letter can clarify financial circumstances, provide insight into the [applicant’s] lifestyle, and explain factors that might otherwise lead to delays or declines,” she wrote in an e-mail response.
Mr. Theobold acknowledges that advisors face a significant and growing burden of compliance and administrative tasks, but cover letters are an extra item on the to-do list he feels is worth it.
“If you’re running a 100-metre dash, you don’t want to stop at 99 metres,” he says.
“[After] you’ve put in all that work in completing the financial plan, running different scenarios, testing different products, making sure that the recommendation is the right recommendation over the right period of time for the right price, [that] the integration makes sense, and it dies on the table because you didn’t want to write a couple of paragraphs – it just seems beyond reason to me.”