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Category Life Insurance

Insurance: Three underwriting elements you must know

25 April 2019 Liberty

Insurance provides families with protection from life's risks and uncertainties but taking out long-term risk cover is an intensive process. Often, a client meets with a financial adviser or broker and initiates the underwriting process with an insurer. The questions could be intrusive and time-consuming. The potential client’s income, health status, family history and lifestyle habits are all interrogated. It is incredibly important to be truthful during this process.

Lisa Gibbon, Divisional Executive for on-boarding at Liberty, says, “It’s a deeply personal process that ultimately decides the level of cover and cost of the premiums that you will pay. Insurers do this to make sure they have enough information about the client to know that they’ve charged the correct premium.”

Three important elements of insurance contracts

1. Underwriting
Underwriting is the process where an insurer checks if you qualify for insurance and how much you can be insured for. Insurers set pricing based on average risks. While the process may seem painstaking, it is streamlined as far as possible and only essential information is required in order to initiate the policy.

If you are unsure about how to answer a question, speak to your financial adviser. If you feel you require privacy or are uncomfortable with certain questions, you can request a tele-underwriting option. An experienced tele-assessor will lead you through the questions and assist you to answer truthfully and accurately.

2. Full disclosure
If you think certain information might be unnecessary, bring it to the underwriter’s attention. Rather disclose more than you are required to 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 on.

3. Claim pay-outs
Non-disclosure happens when the medical, financial, lifestyle or occupational questions are answered incorrectly or when you don’t inform the insurer about important information, which may impact your claim, while applying for cover. This ranges from deliberate fraud, like not disclosing that you have had cancer, for example, to innocent omissions whereby you simply forget to give certain information, like having gone to the physio for your back two years ago. The most common areas of non-disclosure are related to occupation, financial standing and - most frequently - medical disclosure.

Gibbon explains, “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 a reduced payment at claim stage. Clients should give themselves time to check the summary of the disclosures in policy documents and go back to their financial adviser or insurer if there are errors or omissions.”

If you are concerned about non-disclosure on your insurance, speak to your financial adviser to update your policy to ensure that you have provided all the information required to secure your cover.

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