Clients have started to ask about their life cover in the event of the UK entering into armed conflict or the government reinstating National Service, advisers have claimed.
Jiten Varsani, mortgage and protection adviser at London Money, said he had been approached by a client worried about whether or not he might end up being called up should the war in Ukraine escalate beyond its borders.
Similarly, Hayley-Louise O'Reilly, insurance adviser at Coreco, tweeted that she had been asking providers for information about life cover as a "couple of clients" had been querying this.
Typically, income protection is not available for occupations in the forces; their employer - the Army, for example - will pay for any sick leave.
Similarly, critical illness covers will generally have an exclusion applied against conditions caused while in active deployments, but not in all cases.
War invoking National Service would be considered as a rare event.FordThe situation is different for life insurance - providing someone had not been conscripted at the point of application.
In most cases, if someone is in the Army, then their occupation would be assessed for underwriting purposes and would likely be excluded.
Moreover, cover for soldiers expecting deployment at time of application will often be restricted to cover identifiable liabilities, such as the mortgage amount or other debt.
If the soldier is expecting be involved in the highest risk army activities at time of application, then a much larger loading will be applied. Again, cover will be restricted or, if deployment is expected, declined.
Conscription concerns
The situation is different for people who have taken out cover long before they have decided to sign up; and certainly could become more complicated if conscription was reinstated as some clients fear, Varsani said.
National Service ended gradually from 1957 in the UK. Call-ups formally ended on December 31 1960, and the last conscripted servicemen left the British armed forces in May 1963.
Andy Rayner, IFA at Star Financial Planning, commented: "Life companies underwrite the risk at point of application. It does not say in the T&Cs if you change occupation or are called up to fight a war you're not covered."
But while many life policies have no standard exclusions for when someone who is not employed by the military dies in a conflict, many insurers have suggested they may have to review their policies if there were any reinstatement of national service or there were conscription.
According to Varsani, most providers stated that, as long as the life cover is in place prior to National Service, then the applicant should be fine.
However, most suggested that they might have to amend their policies to reflect the risk to the life assured, and this might affect any new applicant as well as people at the point of renewal.
Insurer caveats
Varsani said he received caveats, such as "if the cover had been taken out knowing they were going to actively take part in a conflict, then we may have a different view".
He said another insurer told him: "If the situation in Ukraine escalates we will see providers, including us, adding supplementary questions to our application process."
Another said: "Existing policies and current new business terms would not exclude death / injury from war on life and CI contracts.
"But if national service were invoked, or escalations were such that we realistically envisaged this occurring, then new business terms would be tightened to exclude such coverage for future policies."
A fourth insurer said if someone decided to go to Ukraine to help as an armed volunteer in the war zone: "A claim arising in Ukraine would not invalidate a policy, but it should be noted that taking part in any unlawful act could lead to cover under any policy being cancelled.
"The background of any claim arising abroad is fully investigated in all cases.”
But Varsani commented: "Insurers really could not decline a claim under the War aspect, and I assume could not say you were breaking any law if it were due to national service."
Rare events
Jon Ford, director of protection proposition at Canada Life, said at a "high level", the insurer will allow for a 'rare event' in its protection pricing.
He commented: "A typical example is a catastrophe or the recent pandemic. War invoking National Service would be considered as this, too.
"Therefore, at the time of a rare event, coverage would be maintained for existing customers for the remainder of their policy term."
We would never alter the terms and conditions of new policies.RobinsonHowever, for new policies or policies at the point of renewal, it might be a different case. Ford added: "In respect of new or renewing customers we would review our terms and conditions to ensure we are appropriately managing the ongoing impact of the rare event.
"A recent example of this is how the protection market adapted when the pandemic started to emerge in 2020.”
Graham Robinson, underwriting developer for Zurich, said the company would not "retrospectively alter the terms of existing cover for customers", and said it would "never" alter the terms and conditions of new policies.
Robinson said: "In some instances, we could adjust our underwriting approach depending on the circumstances presented.
"For example, during the pandemic, we postponed cover for people testing positive for covid until they were symptom free.
"We base our underwriting decisions on whether we can offer terms based on the information presented to us both by a customer and through wider sources."
This might include relevant research and medical studies, for example. But where Zurich would be unable to quantify the risk for the cover that is being requested, then the insurer may not be able to offer terms.
New vs old policies
Kathryn Knowles, co-founder of Cura Financial Services, said the debate around conscription or volunteering in a situation such as the war in Ukraine was an "interesting" one.
For existing policies, she said most standard personal insurance policies are "legally binding on the insurer and they cannot revoke the contract".
However, she warned this could be different for group insurance offered by an employer, as such policies do have a maximum catastrophe limit for each policy. However, she added: "I'm not sure how being drafted would be considered in this event."
For new policies, Knowles said they would "absolutely" change, giving as an example the speed at which income protection providers put Covid-19 exclusions into effect back in 2020.
She said: "I can imagine that some insurers might do the same across life, critical illness, income protection, accident and sickness policies, and probably private medical insurance too.
"The difficulty is insurers must have the financial adequacy to fulfil the claims for existing clients/contracts they have.
"They need to carefully balance their reserves to support potential claims from the existing client bank versus writing new contracts that present significant risk of claim."
How cover might be assessed
In a nutshell, actuaries and underwriters work from historical data to predict future outcomes.
Therefore, Knowles says it is likely an insurer would "look at the amount of army personnel that have died or needed to medically retire after taking part in a conflict of war.
"They would then need to take this data and somehow try to figure out how to model this on a population that have been drafted that are not trained in military tactics and do not likely have the same fitness levels."
Alan Richardson, head of business protection and group for Lifesearch, agreed it was difficult to answer for future events, because how insurers would react to a reinstatement of the draft would "need much more input and consideration from them".
Richardson explained: "As it stands, being employed in the army incurs no restriction, exclusions or additional premiums for life cover.
"If the soldier is expecting to be deployed to an active arena of operations within certain time periods (six months generally) at time of application, then additional premiums will be levied."
I can't imagine insurers would look to apply such an exclusion.RichardsonAccording to Richardson, this is usually set as a rating per mil. "L&G for example would charge £3per mil for two years.
"This equates to an extra £39 per £100,000 cover on top of the base premium. This additional premium can usually be funded by the forces. Evidence of the loading should be supplied to their mess officer or commanding officer for them to authorise funding."
Binding agreements
But while there are exclusions and premium loadings on soldiers or reservists, someone from a non-military background might be able to rely on their existing policies.
Richardson said: "If an individual takes out a life cover while working as a journalist or a mechanic, then joins the Army, no additional terms would be applied in any circumstance.
"There is no war or terrorism exclusion on UK pure life covers. Protection policies are long-term contracts, binding on the insurer. This means they can not change their terms regardless of changes in the life assureds circumstances or environment."
Richardson added: "In the future, having exclusion free Life Cover (other than suicide in the first 12 months) has been the bedrock of trust in the industry.
"I can't imagine insurers would look to apply such an exclusion, but ratings and restriction in covers would almost certainly apply. Insurers are not charities, and could refuse cover.
"In the same manner as Terrorism for general insurance policies, I would imagine a government/public funded scheme would need to step up."
simoney.kyriakou@ft.com
