Why the underwriting process is important
So you’ve decided to take out a long-term insurance policy to provide yourself and your family with protection from life's risks and uncertainties. You meet with a financial adviser or broker and they initiate an underwriting process with the insurer. You find the questions intrusive and time-consuming. You’re asked about your income, health status, family history, lifestyle habits and a lot more. You're even sent a nurse to meet you at a convenient place to draw blood from you, perhaps even weigh and measure you.
It’s a deeply personal process that ultimately decides the level of cover and the cost of the premiums you will pay. Insurers do this to make sure they have enough information about you to know that they’ve charged you the correct premium, and that you have peace of mind that your claim, which is the insurer's ultimate promise to you, is honoured when the time comes.
WHAT IS UNDERWRITING?
Underwriting is a process where the insurer checks who qualifies for insurance and how much they qualify for. Insurers set their pricing based on average risks. Underwriters are required to find out which people stand out from the average, and to charge them the correct premium for their unique risk. This keeps life insurance premiums fair for everyone.
While underwriting can seem painstaking, the process is streamlined as far as possible, by only asking for essential information required to initiate policies. Truthful, comprehensive disclosure is imperative for underwriters to make accurate assessments.
To ensure transparency and to ease the process, your financial adviser or broker can step in to assist where you are unsure about how to answer a question. They are experienced and well-equipped to deal with these questions. Where you feel you require privacy or are uncomfortable with certain questions, you can request our tele-underwriting option, where an experienced tele-assessor will lead you through the questions and assist you in answering truthfully and accurately.
DISCLOSING CONDITIONS FULLY
While underwriting can seem administratively cumbersome and intrusive it is also your most important and powerful tool to get cover that is accurately priced, meets your expectations, and guarantees your claim payment. Even if you think certain information is unnecessary, rather bring it to the underwriter’s attention. Rather disclose everything required, and more, and let the underwriter decide its relevance. Insurance benefits are very comprehensive, and even events you think are minor (such as a previous knee injury, for example) can give rise to claims later.
THE IMPACT OF NON-DISCLOSURE ON CLAIM PAYOUTS
Non-disclosure happens when the medical, financial, lifestyle or occupational questions are answered incorrectly or where you don’t tell us about important information when you apply for cover. This ranges from deliberate fraud (not telling us that you have had cancer, for example) to innocent omissions where certain information is simply forgotten (you went for physio for your back 2 years ago, it doesn't currently bother you, you forgot to mention it) . The most common areas of non-disclosure are related to occupation, financial standing and most frequently medical disclosure. A popular misconception is that insurers avoid paying out claims. This, however, is not the case. Liberty’s philosophy is to pay out all valid claims but it requires cooperation from policyholders from the outset
WHAT YOU SHOULD CONSIDER:
- Failure to provide full medical and financial information at application may delay the underwriting processes and could lead to the cancellation of a benefit or reduced payment at claim stage;
- Take time to think about the questions in the application form and provide all relevant information;
- Consider tele-underwriting instead of completing the paper application. It is a convenient option, particularly if some of your information is sensitive. Your details are treated confidentially and stored securely
- Check the summary of the disclosures in policy documents and go back to your financial adviser or insurer if there are errors or omissions;
- Regularly review your cover to ensure it remains in line with your needs.
The reality is that non-disclosure can result in the rejection of a claim. This can be traumatic because you need the money during this difficult time in your life. This is why it is so important to provide truthful and detailed information during the underwriting stage.
If you are concerned about non-disclosure on your insurance cover, speak to your financial adviser to update your policy to ensure that you have provided all the information required to secure your insurance cover.
* Lisa Gibbon is the Divisional Executive for on-boarding at Liberty.
Liberty Group Limited (Reg. no 1957/002788/06) is a registered Long Term Insurer and an Authorised Financial Services Provider (FAIS no 2409).