Underwrite at Commencement – Adviser Message to Insurers

5
Should all life insurance products be underwritten at the time of application?
  • Yes (92%)
  • No (6%)
  • Not sure (1%)

The adviser community has left product manufacturers in little doubt as to their view about underwriting all policies at time of application.

As we go to press, an overwhelming 90% of our poll audience holds the view that all life insurance policies should be underwritten at commencement. 8% disagree, while 2% are on the fence.

The poll stems from the AFA’s recent submission to the now-closed Parliamentary Joint Committee Inquiry into the life insurance industry, where one of the issues it raised was the apparent different treatment of underwriting across the direct, group and retail advised life insurance sectors.

The issue we’re addressing isn’t whether an insurer will pay a valid claim. Rather the issue addresses the individual who pays premiums for a life insurance policy and who, when eventually underwritten at time of claim, is found to be ineligible to receive the benefit – not because of the event that led to the claim, but because they were never eligible to be insured in the first place.

Commenting on this poll, one adviser has made the simple statement that:

“A policy should never be issued without underwriting…”.

The same adviser added all insurance channels should be made to undertake the same due diligence required by licensed advisers who he says spend hours on getting things correct.

“Then and only then will the declined claims issue recede,” he concluded.

Elsewhere, another adviser shared a similar sentiment:

“Let the insurers take their ‘risk’ at time of application, not with the benefit of hindsight, after a claim has come their way…”

While the poll outcome is no surprise, given our large audience of financial advisers, these advisers appear to have a very solid argument to support their view, which would in turn lead to greater certainty and, dare we say it, greater trust in the life insurance system.

It’s over to you for your final comments as this poll remains open for another week. Make your voice heard…

 



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5 COMMENTS

  1. I have been saying for some time, that the insurance industry will face a devastating hail storm once clients, who believe they are covered, make a claim and find that they are not covered due to lack of underwriting at Application time. If we think rejected claims are high now, wait till those future claims hit the headlines.

  2. Apologies for the strong words but in what way does an insurance policy that will never pay out differ from a scam?

    A non-underwritten, non-automatic acceptance policy takes people’s money – if they never make a claim, they paid for nothing.

    A non-underwritten policy gives people a false sense of security.

    A non-underwritten policy stops people from finding a policy that WILL cover them and if they can’t find such a policy,

    a non-underwritten policy stops them from realising that they are uninsurable and hence self-insured, giving them an incentive to do undertake their own risk mitigation and

    a non-underwritten policy gives insurance companies a strong incentive to be tough at claim time. In other words the policy holder surrenders all power to the insurance company.

    In fact I think it is worse than a scam because it is reputable companies that engage in these practices.

    Have I missed something?

  3. Perhaps if they don’t want to underwrite at application, but are happy to accept the premiums for a policy that may not be valid, they should have to refund all premiums paid if the policy proves not to be payable? Or better yet, just underwrite at application. Either way no free money for the insurer.

  4. It is too late and the consequences can be far reaching when a person goes to claim and is rejected.
    They could now be un-insurable and the cost to themselves, Business, their family and the Government if they become welfare dependent due to non payments of claims, can run into Millions of dollars.

    Direct product floggers are a main cause of the problem and are underwritten by Big Life Insurers who are so focused on the quick sale, that they cannot see the massive problems they have set in motion.

    For every action, there is a reaction. The intelligent strategy is to study what the cause and effect will be of the planned action, then put appropriate measures in place to remedy this.

    Unfortunately, we have very few Companies, or Government employees who understand this, so history continues to repeat itself.

    Most negative impacts are avoidable, if proper thought has gone into the WHAT IF’S.

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