Reprinted from ON THE RISK, The Journal of the Academy of Life Underwriting, June, 2025

Medical misrepresentations and stacking are the highest ranked areas of concern around fraud for life insurance carriers, according to a MIB/RGA study. In this article, we explore each of these types of fraud, utilizing data from each of MIB’s 2 contributory databases — the Code Solutions Database (with impairment information) and In Force Data Vault (in force, applied for and terminated policy data) — to provide insights into prevailing trends and implications for the industry.

Medical misrepresentations

Medical misrepresentations are not only seen as the highest area of concern related to fraud but are also viewed as the most common and most costly. More specifically, non-disclosure of tobacco use was ranked as the most common type of fraud among survey respondents.

MIB collects impairment data relevant to underwriting from our members as part of the MIB Code Solutions services. The industry uses this data to detect and prevent medical misrepresentations. With tobacco use being one of the most frequently non-disclosed mortality risks, in July of 2024, MIB made the decision to require members to report back all tobacco use, both admitted and not admitted.

Leveraging our Aptivity data analytics service, we accessed the MIB Code Solutions data and examined trends in the prevalence of tobacco use across the industry to provide insights on this type of impairment. The analysis reveals that tobacco use and positive cotinine are two of the top 10 most prevalent impairments reported to MIB by our members,

Additionally, in 2024 we have seen an increase of over 50% in instances where tobacco or nicotine use is reported to MIB, as compared to 2023. This rise represents a 49% increase in the percent of total applications where a tobacco or nicotine impairment is reported.

While some of this can be attributed to the new requirement, there does appear to be an upward trend in the reporting of tobacco or nicotine use. However, we have also seen a slight decrease in the reporting of positive cotinine (-1.5%). This difference may be due to the high concentration of applications for lower face amounts where labs would not be an underwriting requirement. The diminishing prevalence of cotinine testing, which was also flagged in a recent RGA study, highlights the value of additional tools such as EHR data to detect the presence of tobacco and nicotine use.

It is also worth noting that several other impairments within the top 10 have experienced significant increases from 2023 to 2024, including elevated A1c levels, marijuana use (both showing double-digit growth), and sleep apnea. Conversely, conditions such as abnormal height and weight, as well as depressive disorders, have seen a decline.

Stacking

In the fraud study previously referenced, life insurance carriers rated stacking as their second highest area of concern for fraud. Stacking occurs when an applicant pursues multiple lower face amount policies to increase total coverage while remaining at a lower level of underwriting scrutiny. As such, it is of greater concern for smaller face amounts.

In a recent analysis of data within the MIB In Force Data Vault, behavior patterns that indicate the potential presence of stacking were observed more frequently for older applicants age 40+. Specifically, ages 50-59 saw greater prevalence of stacking indicators.

Bumping up this statistic against the MIB Code Solutions database, which informs both the MIB Life Index and the Aptivity data analytics service, we see that ages 40+ represented over 56% of total applications in 2024 – which means that more than half of applications are at high risk for stacking concerns.

Our analysis also indicates that policies with less than $500,000 in face value pose the largest risk for stacking. Based on data from our Code Solutions database, more than half (over 65%) of applications reported to MIB by our members were in this high-risk category.

When combining these two stats, the numbers are equally startling. Over 38% of applications reported to MIB are for ages 40+ AND for policies with face amounts less than $500K. Clearly the threat of stacking is one that represents significant risk to carriers.

In our white paper, published in ON THE RISK last December, we examined the financial impact of stacking and churning on the life insurance industry. Based on that study and the analysis conducted, carriers with average face amounts of $300k, have to set aside a minimum of $12k per policy to account adverse behaviors which include stacking. When adding the cost of churning to the mix and factoring in other adverse behaviors such as jumbo violations, the total cost for applications linked to these adverse behaviors could approach $1Billion annually. A staggering figure!

The benefits of contributory data

Non-disclosure, whether about medical impairments or the existence of other policies, can be challenging to detect when policies are issued across several carriers. The best way to address this is for the industry to collaborate and share information of relevance to underwriting.

This need for collaboration is well established within our industry. It is the reason why over 100 years ago MIB was formed by industry leaders to facilitate the sharing of medical impairment data to combat fraud. As part of what is today known as MIB Code Solutions, a check of the MIB impairment codes via the MIB Checking Service is a standard practice for underwriting of individual life insurance policies. And the majority of insurance carriers in the U.S. and Canada readily contribute data to this database as part of a collaborative effort to prevent fraud. In fact, representative studies of MIB members have found that using the MIB Checking Service saved life insurers $30 for every dollar spent for simplified issue underwriting.

The industry has recently come together again with MIB to extend the concept of contributory data to prevent fraud by forming the MIB In Force Data Vault. This second data vault focuses on addressing issues such as policy non-disclosure and adverse behaviors such as stacking and churning. For all MIB members who contribute data to the In Force Data Vault, the MIB Checking service now includes the return of Total Line Codes. These codes indicate the presence of in force or terminated coverage information on an applicant, including insights into the number of policies and total face amount, helping underwriters assess risk more accurately and determine if more information is needed. With this second database, the industry is able to expand our collective efforts in combating fraud.

If your organization is not yet part of this industry-wide effort, please reach out to your MIB contact today to see how you can get involved.