Full disclosures of hobbies a must for life insurers

Dalene Allen, underwriting expert and co-founder of specialist long-term risk cover provider Altrisk, looks at the impact of hobbies on life insurance premiums. Your clients must make full disclosure to avoid problems at claims stage.

Your clients’ hobbies will significantly affect the premium an underwriter determines for life cover. Participation in a dangerous hobby or pursuit poses a significantly higher mortality risk. A cave diver, for example, faces greater personal risk than a non-diver and is accordingly charged a higher premium.

Exclusions reduce premiums

Certain hobbies may attract an additional loading on the standard premium offered. A client who participates in the hobby infrequently, or who feels the additional expense is not justified, can opt to exclude the hobby from cover. Your client would then not be able to claim for any incident that results from the hobby.

Insurers do not automatically exclude hobbies or avocations. Altrisk, for example, offers cover for once-off participation in certain events. A person who does a diving course while on holiday or a once-off bungee jump would be covered without having to inform us of their participation. It is, however, important to check your client’s policy wording in this regard.

Full disclosure required

Dangerous avocations must be declared at policy inception. Even though hazardous occupations or hobbies can impact a person’s eligibility for insurance and the offered rate, it’s extremely important to answer this section of the application honestly and completely. If your client takes up such an avocation after inception of the policy, they must let the insurer know. The insurer can rescind coverage if there is missing information or non-disclosure!

You should instruct your client to provide the insurer with as much information as possible to ensure a fair assessment. The following are examples of avocations and the additional information needed to determine the correct premium loading.

• Scubadiving: Recreational diving up to 40 metres would not be loaded provided your client is qualified to dive these depths. Cave diving, potholing and other high risk diving can be loaded – or if preferred – excluded.
• Mountaineering: Ardent mountain climbers should describe the type of climbing they do, because
- The risk increases when your client climbs alone;
- Climbing without ropes is much riskier than rope climbing;
- The height of mountains climbed is also a factor. At 6, 000 metres above sea level your client is at risk of altitude-related disorders such as pulmonary hypertension, hypoventilation and right heart failure.
• Aviation: Aviation rates should be individually calculated according to your client’s personal experience. Altrisk uses an actuary, who is also an experienced commercial pilot, for these calculations. We consider the type of aviation licence, type of aircraft and how much experience your client has. We also consider the number of hours your client will be airborne in the next 12 months and the type and quality of airstrips used.
• Motor sport: Altrisk found that motor sport safety standards have improved dramatically over recent years. Applicants with a valid motor sport licence may qualify for cover with no loadings or exclusions. But do take note that the client’s health and lifestyle still remain a key factor.

If in doubt, disclose

As a broker you must ensure that your client makes full disclosure regarding the nature and frequency of his / her avocations. You should obtain cover from an underwriter with the necessary expertise to rate the client fairly and on an individual basis. Don’t ever assume that something is not important. If it crossed your mind, then it is certain the underwriter needs to know about it.