Your IndustryMay 1 2014

Underwriting process for business protection

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Business protection generates larger sums assured so Alan Lakey, partner of Hemel Hempstead-based IFA Highclere Financial Services, warns the underwriting tends to be more intrusive.

Mr Lakey says advisers should expect assessments possibly involving medical examinations or even more in depth tests such as ECGs or scans. Additionally Mr Lakey points out the financial aspect will be investigated to ensure that the sums involved are realistic.

But Dougy Grant, protection director of Aegon, says the medical underwriting is no different to that for personal protection. The risk of the life assured dying or suffering a critical illness within the term of a policy is assessed.

From a financial point of view, Mr Grant says an underwriter needs to establish the purpose of the cover, how a loss to the policy owner will arise and the size of the potential loss. Using this information, Mr Grant says an underwriter assesses whether the level of cover requested is appropriate and indemnifies the business without creating wealth.

He says the financial underwriting can usually be done from the application form for life cover up to £1.5m in the case of Aegon, with an additional financial questionnaire for cover up to £3.5m.

For cover over these amounts, Mr Grant says copies of loan agreements, business accounts and valuation reports will also be required. He says the approach is similar for critical illness, but with Aegon the financial questionnaires and other financial evidence start at £850,000 and £2m respectively.

Mr Grant says: “Companies who specialise in business protection and large cases will usually have a specialist team of dedicated underwriters with a vast experience of high value business protection will underwrite the application, ensuring the process is as quick and efficient as possible, offering a proactive and flexible approach wherever possible.”

Depending upon the level of cover, Emma Davies, market development manager of Legal & General, says there may also be financial underwriting evidence required i.e. loan offer letters, copy of accounts, etc.

Each application is assessed individually and Ms Davies says all providers will publish their medical and financial underwriting requirements for advisers.

She says they can also offer telephone support where you can call to discuss an application prior to submitting the case.