Underwriting – not too difficult

Any insurance business is built on the foundation of underwriting. Who and how we underwrite determines cover and pay-outs.

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

it is important to recognise that this kind of underwriting for disability cover should be done by specialists in the field, rather than an insurer who focuses on life insurance or uses a call centre, rather than specialist underwriters.

Disability versus life underwriting

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

In contrast, underwriting for disability cover 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. The red flags in disability cover underwriting include musculoskeletal complications, particularly the spine and joints, as well as psychological disorders and abnormal blood results.

Determining factors

There is considerable information required for accurate disability cover underwriting. An insurer that specialises in this space should be able to narrow down the requirements and provide more accessible ways for clients to meet them. Tele-underwriting, for example, has been a big help in this regard, especially when aligned with the availability of a travelling nurse’s service to complete any necessary tests.

Other considerations when evaluating an insurer for underwriting disability include:

• Clear and simple occupation duties.
• A reduction in standard medical requirements for permanent income protection.
• A focus on blood profile and an abbreviated Short Medical Report (SMR).
• Improved non-medical limits (no doctor medicals) and reduced blood tests.

These considerations mean less capture upfront and, consequently, fewer delays in obtaining missing information. Therefore, the application can proceed more quickly. For example, standard medical requirements for underwriting are similar for permanent and temporary income protection, but temporary income protection only requires HIV testing.

A key factor in ensuring the underwriting process goes as smooth as possible is the extent to which the client is prepared to assist the insurer in gathering all the necessary information. While many clients are nervous about disclosing their medical history, they need to understand that the less information they give to the insurer, the more conservative the underwriting decisions will be. In addition, the further the insurer needs to investigate the medical history, the greater the delay in obtaining cover.

What if cover is declined?

While the majority of applicants are accepted on standard rates, certain individuals might not qualify for standard disability cover. Examples include individuals who refuse to comply with medical directives, are self-treating or self-medicating, or individuals with:

• 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 such as heart attacks, strokes, complicated diabetes, depression and
• hazardous work or travel conditions.

With the right insurer, this does not need to be the end of the line. 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. It is important to know what other options for cover is offered by an insurer when applying for cover.

Underwriting does not have to be an unpleasant experience if advisers and clients have a good understanding of the process and what is required, especially when it comes to specialist areas such as underwriting for disability income protection.