Assessing risk involves more than just considering the medical and family history of an applicant. Simon Taylor looks at how travel, occupation and pastimes are viewed when underwriting protection
INCREASING NUMBERS of applicants travel extensively with their jobs and there are more people involved in sports or pastimes that may pose a risk to the cover they are being considered for, particularly the sickness-related benefits such as waiver of premium, or total and permanent disability (TPD) benefit. The job itself may also carry extra risk for the underwriter to consider.
Occupational hazards
The client's occupation is traditionally the first thing the underwriter will see on the proposal form, before they even consider the health questions. The majority of these will be acceptable at standard rates for all cover at a glance, but there are those that will incur an extra charge. Obvious examples of these would be the more heavy manual workers in the construction industry, those who work at heights, underground or offshore on oil rigs. The risks are obvious too, accidental deaths from falls or mishaps with machinery, working in adverse weather conditions, or even through travel to and from the rigs by helicopter all contribute to the decision.
While health and safety continues to improve and the statistics show a decrease in the death rates in these industries, there is still an over and above the average death rate in certain jobs. There are also certain jobs that statistically carry an above average risk due to the lifestyle associated with their occupation. For example, publicans have a 50% higher mortality rate than the norm mainly due to excess alcohol. There is no automatic charge by the insurer, but a GP's report would have to be obtained to ensure the applicant was in good health with no extra risk factors.
Another group that demands close attention is serving members of the armed forces and the underwriter will request an armed forces questionnaire. This will determine the risk of the individual. Most occupations within the armed forces are acceptable at standard rates for life and critical illness cover, any rating will depend on whether the applicant is under any orders to proceed to an area of potential or actual conflict, and also whether the role they perform is rateable.
This would include fast jet pilots or navigators, bomb disposal or SAS members and other more dangerous roles, although these are only a minority of the forces, and it is possible that if the applicant is a member of the forces and rated due to their occupation, they may receive a salary subsidy to cover some of the extra premium.
Occupational ratings are usually charged as a 'per mille' (pounds per thousand pounds sum assured) loading, reflecting the statistical risk. For instance, a fast jet pilot in the air force would be rated £9 per £1,000 sum assured per annum which for £100,000 sum assured represent a £900 loading per annum or £75 extra a month. This is to reflect the statistical risk that nine in 1,000 fast jet pilots is the expected mortality rate a year. This would come from accidents in peacetime and the risk that conflict can occur at any time. This is clearly one of the more risky occupations, a roughneck on an oil rig would be rated at two per mille and a roofer working above 40 feet would incur a one per mille loading.
It can be useful if the IFA feels the occupation may be rated to call the underwriting helpline and seek advice from an underwriter as to what information to supply with the application and obtain an idea of the likely loading.
Trouble abroad
Overseas travel is also a potential area of concern for the underwriter. By and large holidays can be ignored unless they are lengthy sabbaticals travelling to remote areas and similarly most travel for business purposes will be acceptable. However, there are always certain hot spots which will influence the underwriter's decision.
Some of these are constant such as certain countries in the Middle East and Africa and areas within the former Soviet Union. Other countries may present a risk depending on political instability at the time of application. The underwriter will seek the advice of their reinsurer who will base their recommendations to a large degree on the up-to-date advice given out by the foreign office, which has a website advising British citizens which countries to exercise caution with when travelling abroad.
The risk when abroad comes from many different factors including the targeting of foreign nationals for kidnap and violence, political instability leading to the possibility of being in the wrong place at the wrong time, any internal warring factions, poor hygiene and medical care and tropical diseases. The reliability of methods of transport within certain countries can also present an above average accident risk.
Again it is useful to discuss these cases with an underwriter prior to application. The information required will be which countries are visited, for how long and for what purpose ' what role is the applicant performing while there and whether it is white collar or manual job.
It is also useful to know who the client works for, employees of large reputable companies or governments will usually present a better risk as their employers should be exercising the utmost care and diligence before asking them to travel abroad.
Is there any travel internally while there, if so is it by light aircraft, does the client stay in major cities and in hotels only or work out in the field? The more information the underwriter has, the more informed decision they can make and the quicker the case can be processed. Any loading would again be a per mille loading.
There are also certain sports and hobbies which may present a risk that the underwriter will need to consider. This is becoming more commonplace as people have more disposable income with which to enjoy their leisure time and extreme sports become more popular. The insurer will have questionnaires for the more popular sports and pastimes such as mountaineering, sub-aqua diving, aviation and motor sports which are formatted to obtain the necessary information to assess the risk.
Again, an idea of the likely rating can be obtained via the underwriting helpline as well as what information would be required for those sports not covered by a questionnaire.
Small print
Any rating would depend on the level of experience the applicant has obtained and the frequency and extent of participation. For example, someone who participates in sub-aqua diving up to 20 times per annum to maximum depths of 40 metres with no internal cave or wreck exploration would usually be acceptable at standard rates while someone who dives 100 times a year to greater depths with exploration would be rateable anywhere from one to five per mille upwards.
Ratings for light aircraft flying would depend on the amount of hours flown a year, up to 75 hours per annum would be one per mille, over 75 would be two per mille upwards, rotary wing (helicopters) would be two per mille up to 75 hours and over 75 would be three per mille upwards.
Mountaineering ratings would depend on whether the client only climbs in the UK, or is more extensively involved and the heights climbed to. Motor sports would depend on how many events per annum, engine size and type of events participated in. The insurer may choose to exclude any claims relating to participation in these sports from the critical illness, waiver of premium and total and permanent disability cover in addition to life cover.
Clearly there are many variables involved in underwriting occupation, overseas travel and pastimes. The key to assessing the risk is making sure detailed information is supplied as outlined above. Obtaining an idea of the likely rating and what information the underwriter will require by using the helpline will help the application progress more smoothly.
Simon Taylor is a senior life and disability underwriter at Scottish Equitable Protect
