Underwriting for disability cover made simple

Underwriting for disability cover has a reputation for being a complex, strict, and demanding process but it does not have to be that way with the right skills and systems in place.

Compared to disability cover, underwriting life cover is a much simpler process as the underwriter only has to determine if the client has a life-threatening pre-existing condition. The client will then either qualify for life cover, or not. Claiming on a life cover policy is equally straightforward.

Underwriting disability requires taking into account a vast number of possible claim scenarios and conditions, each of which must be evaluated along with the applicant’s state of health and occupation. Red flags in disability cover underwriting include musculoskeletal complications, particularly the spine and joints, as well as psychological disorders, and abnormal blood results.

There is a considerable amount of information required for accurate disability cover underwriting and as a company you have to narrow down the requirements. Reducing questions on questionnaires and providing more accessible ways for clients to meet them, are just some of the ways this can be achieved.

Online processes is becoming a significant driver of this change for a lot of companies, especially when aligned with the company’s risk assessment model and the availability of, for example, a travelling nurse’s service to complete any necessary tests. Industry improvements we have seen when it comes to underwriting processes include some of the following:

• Clear and simple occupation duties.

• Reduction in standard medical requirements for permanent income protection.

• Focus on blood profile and Short Medical Report (SMR).

• Improved non-medical limits (no doctor medicals) and reduced blood tests.

• Reduced SMR questions and an abbreviated Short Medical Report.

Less capture upfront means fewer delays in obtaining missing information and the application can proceed faster.

Standard medical requirements for underwriting are, in some instances, similar for permanent and temporary income protection, but temporary income protection only requires HIV testing. A key factor is the extent to which the client is prepared to assist this process. The less information the company has, the more conservative the underwriting decisions, and the more the company has to investigate medical histories, the greater the delay.

The reality is that some clients might not qualify for cover, because of a number of possible reasons. This includes:

- Clients who refuse to comply with medical directives, are self-treating or self-medicating.

- Material and unexplained symptoms (undiagnosed), untreated disorders, or abnormal diagnostic test results.

- Conditions or disorders restricting or limiting occupational duties.

- More than three pre-existing conditions.

- Disabilities lasting six months or more, within three years of application.

- Recommended, contemplated, or pending surgery.

- Pending diagnostic evaluation.

- Severe chronic disorders e.g. heart attacks, strokes, complicated diabetes and depression.

- Hazardous work or travel conditions.

Individuals who do not qualify for standard rates, might still qualify for some form of cover through special terms such as loadings, reduced benefits, or some other policy modification.

To gain a high degree of certainty for clients at claim stage, insurers have to underwrite carefully at application stage. The reality is that there are a lot of companies which deliver unpleasant surprises to clients at claims stage, and this is not good for the industry.