Mortality vs morbidity Understanding the difference

What is the difference between assessing mortality and morbidity, and how are they applied when underwriting an individual’s application for cover? Dalene Allen, co-founder and Underwriting Director at Altrisk, answers this underwriting question brokers o

When assessing mortality, an underwriter looks at the risk of a person dying either before or after the age predicted by actuaries, in other words, the underwriter assesses against the incidence of death in a specific population.

Morbidity refers to the risk of an individual becoming disabled or impaired during the course of his or her life.

Application

The application of mortality and morbidity assessment scenarios are very different in terms of the type of risks to be covered and brokers need to bear this in mind when advising their clients. It’s also one of the key reasons why complete disclosure in the application form is crucial. The details of the application form along with the required medical test results enable the underwriter to translate how these will impact on mortality and morbidity scenarios.

In underwriting terms, mortality comes into play when making an offer to provide life cover, while morbidity is assessed when providing protection against disability, critical illness and loss of income.

Secondly, the time-frames are different. With life cover (mortality), the protection is for an event that will happen somewhere in the future. With disability, critical illness and loss of income (morbidity), a person can be involved in an accident that has an immediate impact, or develop a condition that is likely to affect him or her within 10 years. So a shorter-term view is required when assessing morbidity risks.

Divergent risks

The underwriter will also separate life expectancy from diseases that may cause death in the long-term, but could disable the person in the short-term. For example, a stroke may not be fatal, but could result in partial paralysis. And, while some diseases do not affect life expectancy, they are debilitating: depression and back pain affect quality of life and possibly the person’s ability to work and function normally.

The difference

Finally, life cover (mortality) protects against a definite event that will occur at an unknown time, while disability and income protection (morbidity) cover events which may or may not occur. The risks are completely different.

Impact on claims

This influences the claims process. With life cover, the claim event is clear. With disability and income protection, the person’s quality of life and ability to work after the event are arguably more important than the event itself. Here, claims assessment is far more ambiguous, because a judgement call is made on a person’s ability to carry out activities of daily living and perform the occupation and duties he or she disclosed at application stage.

This is why brokers need to encourage their clients to make full and accurate disclosure when applying for insurance policies. It is also vital for clients to inform brokers of any changes that could influence the underwriter’s view of the client’s risk profile.