Your client’s health: a blessing or a curse?

Published headline rates for life, income protection and critical illness cover insurance policies do not always tell the full story, as a significant minority of applicants will have poor medical histories or risky pastimes which will attract premium loadings or exclusions, or possibly even lead to declinatures.

Nevertheless, independent financial advisers need not actually specialise in protection to handle such non-standard risks. The key is to manage client expectations.

Mark Jones, head of protection at LV=, said: “It’s probably not sensible to tell clients with health problems what the standard terms are, and there is a lot to be said for explaining that terms are likely to cost more for higher-risk cases but that this probably actually represents better value as they are more likely to claim than the majority of policyholders.”

Different protection insurers’ attitudes towards the same risks can vary significantly. Furthermore, these stances can change markedly over time.

Tom Conner, director of London- and Brighton-based specialist intermediary Drewberry Insurance, said: “Obesity is obviously an important consideration, but insurers taking quite lenient stances on this include LV= on all protection products and Exeter Family Friendly on income protection. Aviva is also good for obesity in the sense that it doesn’t impose loadings for it if there are no additional health risks.”

Most insurers now offer underwriting helplines that can answer preliminary questions about non-standard risks before clients fill in any forms. By using these for ‘pre-underwriting’, advisers can identify the insurer most likely to offer the most favourable terms on any particular risk. This saves time and can avoid clients having to unnecessarily declare to other insurers that they have been accepted on non-standard terms.

Some insurers still ask applicants to declare such information and, although they will always offer terms based on their own underwriting, this can prove a sensitive issue with clients and can involve a great deal of unnecessary administrative hassle. It could also lead to non-disclosure issues in the future if clients forget to mention the necessary details.

Before actually phoning the helplines, advisers should obtain all the medical information they are likely to need to discuss the risk in question.

Emma Thomson, life office relationship director at national specialist intermediary LifeSearch, said: “If applicants have high blood pressure, ask for the latest readings, and if they have depression, establish the symptoms, the cause of it, whether they’ve been off work and what medication they are taking. For diabetes sufferers it is important to ask for blood sugar readings to indicate how well controlled the condition is, and to ask for their weight and whether they smoke.”

But selecting the most suitable policy at the outset is only the beginning of the adviser process with non-standard risks. Advisers should also carry out regular reviews to ensure that clients are not missing out on chances to obtain better terms. For example, policyholders may have given up high-risk occupations or hazardous pastimes, or medical conditions may become less risky with the passing of time or changes in underwriting attitudes.