Digest articles
How do people with medical histories get life insurance?
By Garry Heath
Jun 29, 2004, 10:28

There is a revolution going on in the UK life insurance industry. The use of computers is transforming the collection of information and the assessment of most clients is becoming automated using a derivative of the credit scoring software used by loan companies.

In theory, insurance companies can even issue policies on the spot. In time you should be even be able to apply for cover at your local “hole-in-the-wall” machine but, as the process will take over 20 minutes, make sure I am not standing behind you at the time.

All this IT stuff is brilliant at providing cover for around 70% of applicants, but the system is much less useful to the other 30% of clients - over 1 million applicants a year, who by virtue of their medical histories, current medical condition or hazardous pastimes and pursuits find themselves being sidelined by the process.

Many people believe that those who have had a significant medical event will not get cover. At the Special Risks Bureau we estimate that this perception prohibits over 500,000 people from applying for cover every year. The reality is that cover is available at reasonable rates for over 97% of clients if the case is properly brokered by experts.

To appreciate the problems - why not try running your own insurance company for a few minutes. You want to attract the maximum amount of business. Your pricing policy allows you considerable latitude in the types of cases you can accept and over 90% of your applicants will be accepted at normal rates. So why don’t you accept everybody and maximise your sales?

Well, what if one of your applicants is currently actively being treated for cancer? Would you accept them as a risk? Remember it’s your money. No, I wouldn’t either. What if they had cancer 5 years ago, were properly treated then and are being monitored and are still in remission? You are going to be a lot more confident about this applicant; so am I; and you might well offer them cover but may charge a bit extra.

What if they are 6ft tall and 16 stone, a bit cuddly and we know on average cuddly people do not last as long. You decide that your insurance company will have an underwriting policy that accepts this degree of cuddliness at normal rates. Other companies won’t have this policy so you have a sales edge.

So what have you learnt? Running an insurance company is all about assessing risk and to assess risk you need really good information. Applicants cannot give too much information; generally the more information given the more company underwriters relax and give better terms. Companies always maintained the right to cancel the cover of anyone withholding information that might have led to a rejection and they are getting tougher on this.

So what does all this mean to the 30% who want life insurance and need more individual consideration? Until recently this group was poorly served by the industry.

Those who applied to individual insurance companies and banks may have found their application rejected or priced beyond acceptable levels. Those who went to the independent sector often found themselves having to sign a number of proposal forms so that their risk could be assessed by a number of different companies, but this process takes forever and is very expensive to the industry.

At the Special Risks Bureau we have created the first of a new form of brokerage specialising in the needs of the 30% of clients who do not benefit from the automated process. Firstly we only have one form – ours, which has been designed specifically for those who have medical conditions. Clients complete that form and that is the end of form filling. We then present that form to our own in-house medical underwriter who looks at what other information might be needed. This is usually available from the client’s GP but sometimes he may instigate other tests. This is at our cost.

When all the information is packaged together, we send it to a number of top insurance companies who have all agreed to accept our paperwork and use our methods. They have four days to decide of they wish to offer cover and at what terms. All this more than halves the time taken to get a decision and widens the likelihood of cover being available at acceptable rates.

How does this apply to those who need H·E·A·R·T UK’s advice? Until recently getting any form of cover was difficult but recent medical papers have highlighted the positive long term life expectancy for those who take statins and maintain a healthy life style. Indeed one report suggested that life expectancy for this group may be greater than the public as a whole. Whilst insurers may not yet accept this second finding, they are willing to consider cases from clients and reinsurers are also being increasingly positive.

At the Special Risks Bureau we see this as a major area of our activities and look forward to advising H·E·A·R·T UK members on their life insurance needs. We understand that clients may have more than one medical condition. Equally we understand that H·E·A·R·T UK members may well have hazardous pursuits and occupations.

Garry Heath
Executive Chairman Special Risk Bureau
www.specialrisksbureau.com
Tel: 01245 491417

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