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Insuring the uninsurable

01 August 2008 Adrian Hofman, Health & Accident

The broker of today has access to a broader market as specialist niche insurers and specialist underwriting managers have emerged over the past 15 years, who underwrite either complicated risks or adverse risks that general insurers avoid.

These types of risks would generally include persons involved in flying activities or professional sports, persons with certain health conditions, thatch buildings and construction projects. There are specialist underwriting managers who are prepared to underwrite minibus taxis - a type of risk which was previously uninsurable - and have been successfully doing so for years.

Health risks

If brokers wanted to insure any health condition perceived to be a higher risk 15 years ago, they would have had to approach Lloyds of London. Now, however, there are various local risk carriers who are prepared to offer life and disability insurance terms to persons who have higher-risk health conditions and were previously declined by general life insurers. Although the insured may pay a higher premium and enjoy only restricted cover limits, at least they have access to the market.

Government intervention

Various aspects of government legislation have allowed access to cover that would previously have been difficult to obtain, specifically cover for HIV and the list of Prescribed Minimum Benefits enforced on Medical Aid Schemes. Open market insurers, given the choice, would not willingly have written these types of risks with the terms and conditions now imposed upon them.

Broader definitions

The definitions of disability have broadened to include policies that not only define physical impairments as "disabilities" but also as "debilities", "partial temporary disabilities" and "physiological impairment". All these various degrees of disability illustrate how underwriters have broadened their scope of cover to include more health conditions.

Income Protection Policies are becoming more specific as to what occupations may be included in cover and what scope of cover is offered to a defined level of disability. For instance, an insurance broker who has a broken ankle may not be able to drive a car in order to visit clients and prospective clients, but may be able to source and draft quotes, prepare insurance proposals and send correspondence to clients. These activities may form 40% of his or her work activities, and as such the broker may be deemed 60% "disabled".

Dread diseases

The list of diseases listed as "Dread Diseases" has also expanded enormously over the past 15 years. There are some insurers who cover up to 25 health conditions under "dreaded diseases". Again, the insured may pay more for expanded cover, but now has access to broader cover not previously offered.

A wider approach

There was a time when access to certain types of health cover could only be obtained by those with a certain type of educational degree or level of earnings. Now most employed persons may purchase similar type products.

If there is "uncertainty" as to whether a health condition will "occur" or "re-occur", then the risk is insurable. There are insurers who are prepared to look at these previously "uninsurable" risks from a different perspective. If the market can be researched and the degree of uncertainty established, the risk can be underwritten. It is standard procedure for any underwriter to avoid those risks that are not understood. It is for this reason that many underwriters have made it their business to either skill themselves up in such areas, or associate themselves with underwriting managers, who are experts in such fields.

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