Life Insurance  

Dealing with the challenges of loading

This article is part of
Guide to managing obstacles in protection

Dealing with the challenges of loading
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Advisers must be more "realistic" with their clients about the potential high cost of cover if they expect loading to be applied to an insurance policy, an expert has warned. 

Tom Conner, director at Drewberry, says clients may reject a policy if an adviser initially gives them a low quote for a standard policy but later gives a higher figure once loading has been applied in the underwriting process due to a medical condition.

Conner adds: “If an adviser thinks that a policy might be loaded, don't give the client a quote based on standard terms. If the standard premium is £40, say, and the client sets their expectations at that level and then the premium gets loaded to £120, there's a good chance they won't accept it. Do the research first and set a realistic expectation.”

He made the comments while discussing the obstacles to insuring clients when one thing in their medical record means loading is applied.

Loading, as explained by insurance company Compare Policy, is an additional cost that is part of the insurance policy premium that seeks to cover higher anticipated losses, which an insurer assumes to incur by providing cover for a risky policyholder.

This is a major issue for advisers as it involves a lengthy process of ringing round providers to source an alternative.

Conner suggests that the UnderwriteMe platform can help to speed up this process for insurers that are on the platform, as it can provide underwritten premiums instantly after completing an application.

However, for more complex cases, advisers still need to call underwriters across providers, although they can speed up the process by limiting their hold times. 

He says: “Reduce hold times to speak with an underwriter to less than five minutes. Insurers often talk about closing the protection gap but their adviser service is often a key barrier to writing more business. Advisers should be spending more time speaking to clients rather than wasting time on hold to providers.”

Outsourcing is another solution some advisers use when dealing with loading. 

Kusal Ariyawansa, chartered financial planner at Appleton Gerrard Private Wealth Management, uses a specialist insurance broker to deal with such cases. 

Ariyawansa says: “For such cases I simply refer this to our specialist insurance broker who knows the ins and outs of provider requirements. For advisers, it would be easier if there was an online standardised questionnaire that filters providers – the worst is to apply to a lender and then get rejected.”

However, the loading process does not need to be viewed as a burden. 

Alan Chan, director of IFS Wealth & Pensions, says it is an area where a good adviser-client relationship can add value to the process. 

Chan says: “This is something where advisers can add a lot of value to a client’s circumstances. Quite often when you are talking to a client about protection you are not aware of their medical history. It can be a very sensitive topic and it’s understandably difficult for clients to open up about, especially if they are new clients where you haven’t got that relationship yet."