ProtectionSep 24 2020

How to get your vulnerable clients covered

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How to get your vulnerable clients covered
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Over the past year, consumers have told Financial Adviser horror stories about their treatment at the hands of insurance providers. 

One woman, who has requested anonymity, has been left with no choice but to forego insurance when she goes on holiday to see her family - who are scattered all over the world - because travel insurers simply will not cover her in case she has an episode of mental ill health on holiday. 

This is despite all the medical advice to people with mental ill health to take themselves away on relaxing holiday breaks. 

"The only two who would offer me cover - one tried to sell me cover at almost £1,000, which was ridiculous - more than my plane ticket", she said. "The other would only cover the loss of my luggage and passport. So I had to go with that, and hope that I did not break my arm or leg on holiday and need hospitalisation."

Another lady, Helen X, told a webinar hosted by Mental Health UK that because she has lived with schizophrenia for many years, she has found insurance doors  shutting on her, despite the fact she has not been hospitalised by it since 1989.

"I've wanted insurance for going abroad, I call up and the person on the other end of the line goes through a set of piercing and harrowing questions ... I've felt pushed into trying to give an answer sooner than I was ready, but each time I give the answer to all the questions, and get to the end I find out they will give me insurance but the exclusions are schizophrenia."

It is too easy to say this treatment happened simply because the clients went directly and not through an adviser. It is also too easy to say this experience is only relating to the general insurance market - and that the retail protection market will give clients a different experience.

Sadly, advisers have found doors shutting in clients' faces because of mental ill health when it comes to life, critical illness and income protection plans, even when it relates to a one-off, historic episode.

One adviser's client made an attempt on their life 10 years ago due to a specific circumstance that led to a period of mental ill health. Because of that, they have been refused life insurance outright by many insurers, despite the fact the man is now happy, has a family of his own and is doing well in his business.

Retail protection problems

Andrew Wilksinson, director of Moneysworth, says: "UK life insurance policies come with a 12-month suicide exclusion as standard, regardless of whether or not the applicant had any mental health disclosures and this is for good reason. But for some people, the 12-month exclusion period effectively creates a barrier to access cover.

"This has led to many people with mental health histories finding themselves unable to access life insurance, which leads to renewed stigma for the client and frustration at being unable to protect their families from the risk of them dying from cancer, stroke, or heart conditions."

When clients come to advisers asking for life insurance or wanting to take out a mortgage or seeking an income protection plan to help provide for their family should the client get cancer or be injured in an accident, the adviser has often been left shocked at the reluctance of insurers to provide reasonable cover with reasonable premiums. 

Some insurers are working to help make the insurance process easier. For example, Scottish Widows has trained staff to take a flexible approach to those with mental health issues, and to be flexible with its underwriting.

Royal London worked with advisers such as Moneysworth and Cura to find a way to support people with an attempt at suicide on their medical history to get the cover they need without punitive exclusions being incorporated into the policy during the underwriting process.

For Zurich's Peter Hamilton, it is important for providers and advisers to take time to work out how to help the client, rather than saying no at the outset. He says: "Where customers have had a history of mental health issues, advisers should liaise with providers’ underwriting experts to discuss these to get an idea of cover available and its cost, to help manage customer expectations at the outset.

"From a provider perspective, the needs of vulnerable customers are factored into all aspects of our products and service.  Front line staff are fully trained so that they know to keep conversations straight forward and easy to follow – this includes not overburdening them with jargon or technical terms and relaying conversations to customers to help validate understanding."

Shopping around

Glen Carnall, insurance adviser and team leader for Cavendish Online, said it involves a lot of shopping around and research to provide bespoke advice for each customer. 

"There is rarely one insurer that is more appropriate for a specific condition or disclosure; it’s a case of doing individual research for each client. Saying that, it’s so positive to see certain insurers, including Scottish Widows, taking a more flexible approach to those with mental health issues and underwriting.”

He believes advisers can help people with a mental health history to get the insurance they need by obtaining an extensive level of detail about the nature of the condition in the first instance, during the fact-find.

This way, the adviser can access more accurate indications from the pre-sales underwriters, which in turn helps to better manage client’s expectations throughout the process.

Mr Carnall adds: "Offering your client an expected outcome or doing what you can to avoid nasty surprises, like large price increases, will help to solidify a client’s trust and belief in you as an adviser and the insurance market as a whole.”

Moneysworth's Mr Wilkinson says: "Mental health is now the number one health disclosure on protection insurance applications across the UK and it covers a wide spectrum of conditions."

So, how can advisers find solutions? Mr Wilkinson outlines in the following way:

 1) Life insurance is often possible and usually at relatively modest ratings or even standard premium rates, however for a significant minority the opposite is true. 

2) Critical Illness insurance mostly covers physical health conditions and so terms can often be possible, sometimes with a self-inflicted injury exclusion..

3) Income protection insurance is also possible and often comes with a mental health exclusion. 

But Mr Wilkinson welcomes moves from insurers to design and adopt new underwriting approaches to help produce better life insurance outcomes for clients with significant mental health disclosures, and in particular life insurance policies that have suicide attempt exclusions.

He explains: "The approach first underwrites in the traditional manner with the 12-month exclusion period but in the event of an unwanted outcome, such as a decline of high per mille premium, the same application is underwritten again this time with a long term exclusion.

"By removing the key risk the insurer is able to consider offering terms and is able to do so at competitive premium rates that are affordable for most. The above approach was designed by three specialist protection adviser firms along with the insurer Royal London."

And this is where going to a specialist financial adviser, rather than going direct, can really prove beneficial for clients. Mr Wilkinson adds: "The scheme is not available direct with Royal London and is only available through three specialist firms, however all three firms deal with introduced cases, so effectively all advisers can get access to this plan via an introduction for their clients."

Open conversations

Cura Financial Services is one of those three firms referenced by Mr Wilkinson. Alan Knowles, co-founder of Cura, comments: "This is where open conversations with insurers and advisers is key. I certainly don’t expect insurers to sit down with me and explain every underwriting decision that they make and the statistics behind it, but it could really make big steps in building trust within our sector."

For him, conversations are not just between client and adviser, but also adviser and provider/underwriter. He adds: "The public and advisers don’t see the medical statistics and insurance claims history, that direct insurers on whether or not to place an exclusion, rate a premium or decline cover.

"As advisers we understand it to a certain level and can buffer those messages to our clients, but the general public does not have this knowledge and is led by the emotions they feel when they see headlines saying ‘Insurers won’t insure me because I had depression’."

Income protection can be more frustrating to arrange. -- Alan Knowles

For Mr Knowles, it is important for the adviser to take time to find out about the client and about the market. Like Mr Carnell and Mr Wilkinson, the main thing is "research".

He says: "If you are faced with a mental health condition that you are not sure about, speak with an underwriter and find out what you need to know, so that they can get an accurate indication of terms.

"I think there is a clear need to be really open with people early on. Many people do not realise that with many life insurance policies they can cover claims linked to
suicide. People are often shocked that suicide is covered by life insurance and they then understand why they have faced barriers in getting the cover.

"In terms of life insurance and critical illness cover, it is unlikely that someone will see a mental health exclusion on the policy (except total permanent disability and waiver of premium). Though there are specialist routes that can allow this and have opened up the door for a lot of people to get insurance, where they would have previously been declined."

But even though such open conversations have led to greater flexibility, Mr Knowles acknowledges there is still a long way to go when it comes to securing the right amount of protection, at the right price, for clients who have experienced mental ill health. 

He states: "Income protection can be more frustrating to arrange. There are a lot of options for people that have mental health conditions, but most will include some form of an exclusion due to the mental health.

"The times that income protection can become frustrating is when you are helping someone with what is considered to be a stronger mental health condition and they are refused cover on all standard routes. I cannot see why, in these situations, a mental health exclusion is not available. If you can exclude mental health claims for someone who has anxiety, why can you not exclude, say, suicide?"

More flexibility is definitely needed.