There is something of a dotted line drawn in the protection industry between traditional protection products such as life, critical illness and income protection, and health insurance products such as private medical insurance and cash plans.
This line exists not only among insurers - life offices often differentiate their ‘life’ business from the ‘health’ business, which may have different staff in different offices - but many intermediaries also often work in the same way.
Protection specialists such as LifeSearch focus on protection much more than PMI, while PMI specialists such as Premier Choice group focus heavily on medical insurance.
Either way it is important for advisers to have solutions for PMI in place, even if it means referring on to a specialist, so as to be seen as a hub for all financial needs and safeguard client relationships.
Here we cover 10 key adviser issues in the PMI market today that advisers should be aware of.
1. Policy construction
PMI policies generally fall into three categories: comprehensive, mid-range and basic. The main differentiator is out-patient cover, with little to no cover on basic plans, an annual allowance on mid-range plans and full cover on comprehensive plans.
There can be considerable crossover between these categories, though, so do not assume that one insurer’s mid-range plan will be the same as another’s. Cancer cover remains a point of differentiation between insurers, although less so than in the past after a raft of improvements in recent years.
2. Underwriting
For new applicants there are two options: full medical underwriting or moratorium underwriting.
Full medical underwriting is the traditional method of enrolment for a PMI policy, where the applicant makes a medical history declaration so that the insurer can exclude any pre-existing conditions of concern.
With the moratorium no medical history is declared. Instead, the applicant signs off on their understanding that conditions that have presented symptoms or required advice, treatment or medication in the past five years will be excluded at the outset. If an excluded condition remains free of symptoms, treatment, advice and medication for a continuous two-year period after enrolment, it will become covered by the policy.
Because no medical history is declared at the point of enrolment, moratorium-based policies are underwritten at the point of claim.
Brian Walters of individual PMI specialist Regency Health thinks that the moratorium is over-utilised, saying some brokers “default to the moratorium because it’s quicker and easier to make a sale”.
Mr Walters says that where the client has no medical history, or has a condition that is historical or sufficiently minor that the insurer would not specify an exclusion, full medical underwriting is more appropriate.
