Are underwriters' standards slipping in the PMI market? Stephen Walker investigates
We all understand and accept the need in the insurance industry for underwriters. They are, after all, the industry's 'minders', protecting insurers from the financial burden of unnecessary risk.
The role of the private medical insurance (PMI) underwriter is to assess a policy application for risk, to identify and then standardise that risk if necessary. Unfortunately, it seems what we are getting with increasing frequency is not risk assessment, but risk avoidance.
Repercussions
An example that recently came to light is the case of a doctor living overseas who applied for international PMI. He declared on his application that he suffered from asthma at certain times of the year and used an inhaler when necessary. The response from the underwriter was to impose an exclusion on the treatment of asthma and all respiratory conditions. This was not respiratory conditions caused by or directly related to asthma, but all respiratory conditions.The bemused doctor pointed out that the exclusion would cover such things as lung cancer, which he had no reason to believe that he ever would suffer from.
These observations were relayed to the insurer who eventually made the concession of stating that lung cancer, sinus infections, tonsillitis and valley fever would be covered. So in effect the exclusion was for the treatment of all respiratory conditions - except for some respiratory conditions.
Using this same underwriting approach, logic would dictate that a knee or ankle problem would attract an exclusion on the treatment of all skeletal conditions. After all, a knee or ankle problem could cause a person to limp, which could in turn lead to a back problem and then various knock-on effects. The underwriter has to draw a line somewhere and decide what is reasonable.
Another developing trait is the apparent practice of underwriting from a manual. An application from a couple for a UK domestic PMI policy was recently accompanied by healthscreen reports for each of them, which had been undertaken on a routine and voluntary basis. The response from the underwriters was to impose over 20 exclusions relating to virtually every condition mentioned in the reports, including headaches, chest pain and loss of libido.
Most people suffer from an occasional headache and it would have been prudent for the underwriter to determine whether the headaches in this case were frequent, severe and/or debilitating before they decided to impose an exclusion.
The chest pain was experienced after a skiing accident and was mentioned in a health screen report some 10 years ago, as was the loss of libido that, it was suggested at the time, was probably a menopause-related problem. Both conditions had cleared up some time ago, no longer existed and were no longer a problem.
In many cases, underwriting quality checks are not in place. A common sense approach would be to consider each individual application in context. Perhaps more underwriters could consider the following points:
• If the applicant is taking a budget policy or a high excess option, it would suggest that they are not interested in making small claims, but are interested in 'disaster' cover to provide for the high cost of inpatient treatment.
• A self-employed applicant is generally less likely to seek medical treatment unless it is absolutely necessary, as they cannot afford to take time away from their work.
• A medical condition may have been self-diagnosed, rather than diagnosed by a doctor. For example an aching joint is not necessarily caused by arthritis, but a doctor may have suggested that it might be due to arthritis without making a full investigation.
Common sense
However there are underwriters who have a pragmatic approach to risk assessment and the wording of exclusions. An applicant who is taking medication to control high blood pressure does not actually suffer from high blood pressure providing medication is maintained. A common sense approach to this situation produces a specific exclusion on "the treatment and maintenance of high blood pressure", which the vast majority of applicants would find acceptable. An underwriting-by-the-book approach often results in an exclusion on "all cardio and vascular conditions" and lost business.
New business, particularly in the individual market, is hard found and the hard work required can very easily be thrown away by thoughtless and mechanical underwriting. The underwriter and the intermediary need to understand each other, talk together and work together in order to provide a better service to the customer.
Stephen Walker is chairman of the Association of Medical Insurance Intermediaries
• If you have any comments regarding this article, please email your views to [email protected]
COVER notes
• Some exclusions on PMI cover could be reduced if discussed in more depth with underwriters.
• Miscommunication from underwriters regarding exclusions can often deter clients from carrying through their application.
