The impact of avocations on underwriting

Avocations are hobbies or pursuits which may pose a higher than normal risk in terms of life, disability and critical illness cover, and as such affect the underwriting assessment.

In underwriting an application for life insurance, avocations significantly affect the rate or premium. This is because a sky diver, for example, is at greater personal risk than a non-skydiver, and is accordingly charged a much higher premium for life cover.

Clients often comment that their particular avocation is safer than driving a car in South Africa. This, of course, may be true, but remember that driving a car is already included in the rates provided whereas avocations are not.

Exclusions

The client can opt for an exclusion, especially in instances where there is no regular participation and the client cannot justify the additional expense.

In addition, not all insurers automatically exclude avocations. Altrisk’s policy, for example, offers cover for once-off participation in an event. As such, a person who does a resort diving course while on holiday or a once-off bungee jump would be covered without the client having to be concerned as to whether or not he or she has cover.

Full disclosure

However, avocations which could be deemed dangerous should be declared at inception of the policy. If clients take up such an avocation after inception of the policy, they are obliged to let the insurer know.

As a general rule for avocations, provide the insurer with as many details as possible in order to ensure a fair assessment. Below are some examples of avocations and the type of information needed to determine the correct loading.

Scuba diving

Normal recreational diving up to 40 metres would not be loaded provided it’s within the client’s qualifications. However, cave diving, potholing and the like can carry an additional loading or, if preferred, an exclusion.

Mountaineering

Factors to be considered for clients who are ardent mountain climbers include:

• when climbing alone the risk increases, either technically or in the event of an accident;
• climbing without ropes is dangerous for more obvious reasons;
• height of mountains - 6000 metres above sea level is very different to climbing Table Mountain and brings an additional risk of altitude-related disorders such as pulmonary hypertension, hypoventilation and right heart failure.

As just one example of the risks mountaineering entails, one policyholder experienced total blindness when summiting Mount Everest. Fortunately this was reversed at a lower altitude, but obviously the danger of descent without eyesight was significant.

Aviation

To ensure a fair rate and appropriate cover, aviation rates should be individually calculated according to the client’s personal experience by an actuary who is also an experienced commercial pilot. Considerations to take into account should include the type of aviation licence, type of aircraft, how much experience the pilot has and the number of hours he or she is expected to be in the air over the next 12 months – even down to the type of airstrips and quality of airports used.

These are but a few examples of the avocations your clients might pursue. Ensure that your client has made full disclosure regarding the nature and frequency of these avocations, and that you obtain cover from an underwriter with the necessary expertise to rate the client fairly and on an individual basis.