Life InsuranceMay 26 2021

Dealing with the challenges of loading

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Scottish Widows
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Scottish Widows
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."

He adds: "Normally details about their health is covered fairly brief in the early stages. If they give us an indication that they’ve got some pre-existing medical illnesses, we would normally ask them to complete a medical questionnaire in advance.

"This is so we can phone around the pre-underwriting teams with the insurers to enquire about their position with such medical ailments and the likely premium loadings or exclusions. This will ultimately save us and the client’s time so that we do not have to submit multiple applications.”

Improving the process

To improve the amount of time it takes for insurers to make their decision, Chan has called on the insurance industry to follow in the footsteps of the impaired life annuities market, which has been digitalised to offer an instant quote through adviser portals after entering a client’s medical and lifestyle information.

He adds: “If the insurance industry can do something similar in the near future, that would help clients and advisers alike, although some cases require GP reports or nurse examinations which can add to the complication and can cause significant delays still.”

Chan says such a move by the industry is especially important as there is no common ground in medical questionnaires, with different insurers asking different questions.

In his experience some insurer policy prices are pushed up by medical issues, while others are bumped up by lifestyle factors.

He recalls a recent case when a client, who was in good health, wanted life and critical illness protection to cover his outstanding mortgage.

One insurer had loaded his premiums from £73 each month to £112 and would not offer total permanent disability (TPD), due to his BMI and alcohol consumption.

However, when Chan went back to the client to obtain more information and then spoke to alternative insurers, he managed to find a reputable insurer who was able to offer the cover with no loading and offered TPD too.

Chan says: “The trouble is there is no common medical questionnaire for underwriting, as each insurer will ask different questions related to the illnesses and sometimes they will ask other questions outside of their condition that is not immediately obvious to an adviser. 

"So, you learn as you go as to what additional questions they will ask, and you go back to the client for their responses, and then onto the next insurer, and repeat.

"By the end of this process, you should get an idea of the various loadings and exclusions and can proceed to apply to the insurer with more favourable terms. This process can take several hours.” 

Aamina Zafar is a freelance journalist