The Disability Discrimination Act (1995) aims to ensure that no one is treated less favourably for ...
The Disability Discrimination Act (1995) aims to ensure that no one is treated less favourably for a reason relating to their disability without that the treatment being justified. In the four years since the Act came into force, the insurance industry has taken on this challenge and looked to adapt to ensure that it meets its obligations. To ensure that the process continues, the ABI has produced the consultation document A Life and Disability Insurer's Guide to the DDA (1995).
Some of the recommendations in the draft guide present new challenges to the ways that insurers sell and manage particularly individual critical illness and income protection business. These challenges may require changes to business practice in ways that will increase access to the products for disabled people at the expense of greater complexity for the insurer.
One major change relates to critical illness. At present, a client with poor health is often declined for critical illness cover. However, the ABI guide suggests that where an insurer is unable to offer full cover, even with an extra premium, they should instead offer cover subject to an appropriate exclusion. The draft guide calls on insurers to be proactive in offering this cover.
To understand how this might work in practice, consider the example of a man with a history of ischaemic heart disease. At present, their application would be declined. In future, the ABI guide is suggesting that an insurer offers a policy that excludes cover for illnesses related to his heart disease, such as exclude heart attack, coronary artery bypass surgery, major organ transplant, own occupation PTD and stroke. The resulting policy would cover the main illnesses of cancer, multiple sclerosis, kidney failure and a number of less common illnesses such as Parkinson's and Creutzfeld Jakob Disease. At present, the practice of removing illnesses is rare.
While the DDA allows the insurer to charge the normal, full premium for the reduced cover, the proposal would mean substantial extra work and complexity. There are obvious system changes, and the underwriting itself would be more time consuming and expensive. In spite of these difficulties, the ABI proposal is clearly within the spirit of the Act and would increase access to critical illness for many people. While a policy with less than full cover may not be ideal, it would the decision of the disabled person themself as to whether they feel the cover offered is worthwhile.
The second main area of change will impact on income protection. The guide suggests that as part of the underwriting assessment the insurer should be proactive in looking to offer full cover with an extra premium being charged for poorer risks. Only if the insurer is unable to do this should cover be offered subject to an appropriate exclusion.
This represents a significant change in practice for many writers of income protection. Exclusions are a common tool in managing applications from clients with a history of depression, or back disorders particularly where there has been resultant time off work.
Insurers will need to invest time and resources to re-examine their current underwriting practices to ensure they remain compliant, and some may need to make changes by rating rather than excluding.
