A life less ordinary

Everyone knows how to arrange life cover if the assured is in perfect health. Call Assureweb or the Exchange and opt for whichever provider comes out cheapest. Many advisers adopt a similar strategy for critical illness (CI) cover ' although given the variation in illness definitions and exclusions, that may be a questionable approach.

The process becomes slightly more difficult when you are confronted with a client who has something materially wrong with them. Many of the leading offices have such cheap rates that putting all the business through with little or no underwriting is a commercial imperative.

It is not that they do not have the capacity to look at each case on its merits, but time is money and they need to minimise the former in order to maximise the latter.

This is also true of many of the direct writers which offer cheap headline rates for term assurance, provided you do not drink, do not smoke and have not visited a doctor for 10 years.

Finding a match

We are often asked to suggest a company that will be sympathetic to a client with a certain condition, be it multiple sclerosis, diabetes or Hodgkinson's disease. When we send our product questionnaires to providers, we ask insurers whether they will consider applications from people with these conditions. While this can be useful for eliminating insurers that are simply not interested in anything remotely sub-standard, it does present problems for those who indicate they will take them on.

Most illnesses afflict people to varying degrees ' diabetes, for example, can be life-threatening or stable, or controlled by tablets or insulin injection. The age of onset also has implications for mortality. So, life offices will consider some diabetic risks more acceptable than others.

Even offices that indicate they may be willing to take all clients with a particular impairment they might not want to publicise the fact, simply because they then become a 'dumping ground' for all advisers with clients with that affliction. As these lives are, to some degree, sub-standard, they will muddy the actuaries' previously clear water expectations of their book's mortality and inflate claims accordingly. Even if all these diabetics are suitably loaded, there will still be a disproportionate number of them in the insurer's portfolio of policyholders ' something the company's actuaries will be anxious to avoid.

Keeping tight-lipped

A similar principle applies to the underwriting of gay men ' certain offices are more sympathetic than others to gay couples, but do not seek to publicise the fact for fear of distorting their client pool. This is largely misguided, because it is sexual behaviour ' the number of partners, use of contraception and so on ' rather than sexual orientation that dictates someone's chances of getting AIDS.

A woman who sleeps her way through a coach load of willing male accomplices on a Club 18-30 holiday is far more at risk than someone in an exclusive homosexual relationship, but the former will not have to fill in a lifestyle questionnaire.

A further complication is that a condition can disqualify a life for one benefit, elicit a loading for another, and be immaterial for a third ' all of which the client is applying for simultaneously.

This has become increasingly prevalent with the growth in menu products. A common example of this will be a client who suffers with a bad back. This may prove unacceptable for a waiver ' musculo-skeletal problems being a primary source of income protection claims. CI cover might be acceptable apart from an exclusion for permanent and total disability, while life cover can be graded at standard rates, as a bad back is rarely fatal in itself.

Depending on the perceived severity and incidence of the impairment, the insurer will either have a questionnaire for it or, more commonly, will write to the applicant's GP or send them for a medical.

As to what life offices can do in the future regarding impaired lives, online underwriting certainly has a part to play. Legal & General (term assurance and CI) and BUPA (Heartbeat PMI plan) have been innovators in this area. It is likely that, in future, any moderately common condition will have a dedicated questionnaire, with questions about degree of severity, frequency of attacks, treatment to date, and the like, which can be brought up for completion online, with a speedy decision made from the provider's internet site. As more providers become more efficient, there is no reason why all these sites cannot be linked to an adviser's own website, thereby enabling him or her to submit a case for a decision simultaneously to a number of providers.

Who can you turn to?

The size of the case can also make a difference. Many offices will not be interested in sub-standard lives for low sums assured, but if the case goes into seven figures then a large case underwriting service may come in handy and offices not usually interested in sub-standard business, such as Swiss Life, may take an interest.

In general, the more sympathetic offices are often those which have been in the protection market for a long time. General Accident, for example, was a good term office, a tradition that has been carried on by Norwich Union, which is often more willing to look at non-standard cases than some of the other big hitters in this market. Similarly, Royal & Sun Alliance both had their moments as protection companies and, while the modern conglomerate is not a specialist, it at least still possesses the underwriting capacity that enables it to look at individual risks that some other providers turn down.

If the conventional market fails, there is always Lloyds. Lutine has been servicing advisers for years, while in recent years Cassidy Davis ' now the owner of Lutine, Crowe Life ' shortly to be re-branded Sterling to reflect its new parentage, Wren Life, Alder Life and Link have all come to varying degrees of prominence.

These companies may not be the cheapest, but the Lloyds market can accept business that insurers traditionally decline. Lloyds' companies cannot offer policies lasting longer than 10 years, but if someone's health indicates they are unlikely to die for at least a decade, then conventional insurers will probably not reject them in the first place. If they do live for 10 years, then at the end of that term ' or earlier, if their disability goes away or into remission ' they can get another Lloyd's policy anyway.

If these offices decline a risk then there are companies which specialise in the business that everyone else rejects. These are companies such as Pulse or Quantum Resources which have their policies underwritten at Lloyds. With the quality of life being underwritten, the rates are inevitably not cheap, but cover can be offered.

So, although there is a home for almost every impairment, clients should be prepared to pay extra for the right cover.