The interpretation of medical evidence in underwriting

Dalene Allen, underwriting expert and co-founder of specialist long-term risk cover provider Altrisk, looks at how personal health information is used in underwriting and why the interpretation of a GP and underwriter often differ.

The purpose of underwriting is to ensure that individual differences between the risks in a pool are taken into account in a manner that is fair to both consumer and insurer. Medical underwriting refers to the use of medical or health status information in the evaluation of an applicant for cover, which proves useful in deciding whether to offer or deny coverage and setting the premium rate for the policy.

A battery of tests

There are a number of factors that affect the overall risk within a particular pool of insured lives, including age (for adults, the risk of dying increases with age), gender (on average, females live longer than males) and health (past illnesses and current health may affect life expectancy). Other factors that could impact on the risk insured include lifestyle factors (such as eating, drinking, exercise and smoking habits), family history and occupation.

For this reason an applicant for life insurance will be asked to undergo a medical examination. Depending on their age, the amount of cover and the information supplied at application stage the applicant may only have to undergo the standard battery of tests. These check for things such as liver function, cholesterol levels, smoker status, BMI and HIV/Aids. If the applicant is older, has pre-existing conditions or a family history of disease the underwriter may request additional tests to accurately assess the risk profile.

In evaluating the medical evidence, the underwriter is assessing whether the applicant has any health condition that could affect their mortality — and hence their risk – compared with the statistics of a specific pool of insured individuals. In the underwriting process, the underwriter makes use of extensive medical research, statistical data derived from existing insurance portfolios and underwriting manuals provided by reinsurers. Both insurers and reinsurers also utilise the expertise of specialists such as Chief Medical Officers (CMO), who assist in the interpretation of complex medical information.

Underwriter versus GP

An area that occasionally leaves brokers and clients questioning the medical findings report is the difference in the health interpretation by a GP versus that of the underwriter. A fundamental reason for this is that a doctor’s report considers the patient’s current state of health while the underwriter looks at longer-term implications.

For example, a 6mmol/L cholesterol level in a 40-year old patient would be considered elevated. However, a doctor may not view the results as cause for immediate alarm, and the client would probably be sent off with a recommendation to improve their diet, exercise more and retest at a later stage. But the underwriter takes into account the implications of an above average cholesterol level on the applicant’s future mortality and morbidity.

The underwriter assesses based on the premise that the behaviour and lifestyle habits that led to the current condition will continue. If the client is also over the recommended BMI, has a family history of heart disease and diabetes, smokes and drinks, the underwriter will conclude differently to the GP on the patient’s future state of health.