As many advisers will understand, long delays between a client agreeing to put a protection plan in place and them being accepted can often lead to NTU’s. One of the main reasons for long delays is an insurer requiring medical evidence and understanding what will trigger automatic requests for such information can make a big difference. With non-medical underwriting limits differing greatly, this week we look at what the limits are for critical illness.
Unlike life protection where the medical underwriting limits are relatively high, critical illness plans have lower thresholds and therefore underwriting is more likely to be a factor. Comparable with life protection there are two different age bases that could be used, age attained (current age) or age next birthday (current age plus one).
If advisers are looking to compare two insurers, then it is particularly important to understand the age basis each insurer uses. For example, a client aged 40 would fall into the age 36-40 bracket for an insurer that uses age attained and the 41-45 bracket for insurers that use age next birthday.
For applications where the policy includes both life and critical illness, critical illness underwriting limits will apply. In such scenarios, and where all else is equal in terms of quality and price, advisers may consider making applications to insurers that have high non-medical underwriting limits so the client is not inconvenienced.
As the risk increases, insurers will generally raise the amount of medical evidence they require. Therefore, as the sum assured and client age increases more intrusive medical evidence will be requested. Perhaps the most important measure is understanding at which point any medical evidence would be requested. Overall the limits for critical illness are approximately a third lower than the limit for life only plans:
· At aged 28 the limit at which medical evidence would be requested for critical illness plans ranges between £500,001 and £450,001 compared to £1,000,001 and £700,001 for life only.
· For age 38 this decreases to between £500,001 and £400,001 for critical illness compared to £750,001 and £600,001 for life only
· At age 48 this further reduces to between £300,001 and £250,001 for critical illness and £500,001 and £400,001 for life cover
· While age 58 is between £150,001 and £100,001 for critical illness and £300,001 and £200,001 for life
The graph below highlights the sum assured at which medical evidence would be requested based on 28, 38, 48 and 58-year-old applicants for critical illness.
Once the underwriting limits are breeched, the type of medical evidence required will depend on the age of the applicant, with younger clients more likely to be asked for a medical first and older clients a General Practitioners report.
A General Practitioners report can take some considerable time to be completed and returned. A GP surgery can be more difficult for the adviser to chase and therefore the timescale of returning these is largely out of their hands.
*AIG & Canada Life do not automatically request a GPR regardless of the sum assured
When speaking with advisers, one of their biggest frustrations in the underwriting process, is the time it can take for GPRs to get completed. In some cases, it can take anywhere of up to 1-3 months, so with AIG and Canada Life not requesting a GPR based on the life assured’s age or the sum assured, this could be seen as a positive for an adviser and for the client.
Although advisers may have no control over how long a GPR takes to be returned to the insurer, from a client’s point of view this is less intrusive on their day to day life than a Nurses or Mini Medical might be. Knowing when a Nurses or Mini medical is required before an application is made can go some way in reassuring the client on what is to be expected when applying for a plan.
A Nurses/Mini Medical (or screening) is generally not as intensive as a full Doctors Medical examination and can be organised by your client at a time that suits them. These will usually involve a cotinine (smokers) test as standard for non-smoking clients.
The provider’s underwriting limits will dictate when a Nurses or Mini medical is required as per the graph above.
Being able to get a critical illness policy on risk without the need for medical underwriting makes life easier for the adviser and more importantly, for the client. It stands to reason that the younger a client is, the higher the limits will be for automatic medical underwriting and as such most younger clients are unlikely to breach these. Older clients, however will often require higher levels of protection and as such the lower limits placed on them is more likely to be a factor. In any event advisers should be aware of when automatic medical underwriting may be required in order to prepare their clients.
Overall, Guardian, Legal & General and Vitality have the highest limits before any form of medical evidence is required. AIG and Canada Life offer a great advantage for clients and advisers by not automatically requesting a GPR, regardless of the sum assured. Legal & General also have the highest rates overall before triggering a requirement for a Nurses or Mini medical .