Can Royal London’s “Underwrite Later” answer advisers medical evidence woes?
In reading this article you will understand:
- How the Royal London ‘Underwrite Later’ initiative will benefit your business protection clients
- How the process works.
- Time limits or sum assured limits that apply.
Over the last year, perhaps the biggest issue advisers have faced when placing protection business is delays in obtaining medical evidence. With the NHS seemingly at full stretch it does not seem like this issue will be become any easier in the near future. Whilst many insurers have done a great job of increasing their non-medical limits, this only solves the problem for clients that have high sums assured and a clean bill of health (or very basic health issues). Today however, Royal London have launched a new initiative which will hopefully tackle these issues head on and in this article we take a detailed look at what this is and what clients it will impact.
The new initiative is aptly named “Underwrite Later” and essentially does exactly what it says on the tin, by enabling advisers to put a policy on risk immediately whilst medical evidence is obtained and full underwriting is carried out. Although only available on business protection written on a life only basis and relevant life plans at this point, it is a great step forward.
How it works
Where a business protection or relevant life case is referred to underwriting due to disclosures in the application or breaching non-medical underwriting limits, Royal London will ask if the client would like to put the policy in force immediately. If the answer is yes, an underwriter will assess the application based on the information given and provide terms.
Where standard rates are offered, Royal London will place the policy in force immediately whilst they obtain the necessary medical evidence. If a loading is applied at this point then Royal London will provide the rating and new premium to the adviser who can then relay this to the client in order to ascertain whether this is acceptable. If the loading is acceptable, the policy can be put in force straight away on these terms, whilst the medical evidence is being obtained.
Based on previous experience, Royal London believe that with Underwrite Later circa 93% of cases will receive terms and therefore be able be put in force.
As this currently only applies for business protection and relevant life the appropriate trust forms will need to be in place before any plan can be put in force.
How long do the Underwrite Later terms last and what happens when medical evidence is received?
Cover can remain in place for up to six months based on the Underwrite Later decision, providing a good window in which to obtain medical evidence. Once medical evidence is received, the underwriters will reassess the case based on the new information at which point the terms may be adjusted up or down. Again, based on previous experience, Royal London expect that in around 80% of cases the original decision will not change.
If based on the new medical evidence, the original rating was too high, Royal London will adjust the premium down and refund the difference in what has been paid back to the client.
If the original rating is increased and the client is happy to continue with the plan on the new terms, then they will need to pay the difference in premiums. In both scenarios, the client is provided with another 30-day cooling off period from the date the new terms are issued.
Where the medical evidence leads to a decline, the policy will cease and all premiums paid will be refunded. Royal London have stated that based on previous experience this will generally only be the case where not enough or incorrect information is provided on the original application and only likely to happen in around 3% of cases.
What happens if medical evidence is still not received in time?
In cases where medical evidence takes longer than six months to obtain, Royal London will cancel the plan. In such scenarios a refund of premiums will not be provided as the client has been covered throughout the initial six month period.
If advisers want to continue the cover and application, they will need to resubmit the application with any changes in circumstances included at which point the process will start again. Once submitted the medical evidence would not need to be re-requested (unless there are new disclosures meaning more medical evidence is needed).
Like any protection feature where the full risk has not been fully assessed there are understandably some limits. In terms of the maximum allowable sum assured this sits at £3.5m per person. Where multiple plans are set up under the business protection menu plan to cover more than one person within the same company, the £3.5m limit will apply across all plans combined.
If the sum assured exceeds Royal London’s financial evidence limit of £2m, the financial evidence will need to be supplied in advance of the plan being put in force.
With regard to cases that are given a rating, the maximum loading Royal London will allow in order to qualify for Underwrite Later is +100% or £2 per mille. Whilst this is slightly lower than we would like, Royal London will not apply an standard exclusions to the cover other than their standard suicide exclusion that is applied to the first 12 months of their plan anyway.
Overall, we see Underwrite Later as an excellent addition to the Royal London business protection proposition that will enable advisers to get the vital cover many businesses need much quicker. In an ideal world, this cover would be offered to clients with higher ratings and those taking out personal protection plans, however Royal London will be monitoring progress with an eye to expanding who this is offered to and across different benefits. This aside, this initiative provides much more appropriate cover than free cover during underwriting and for a longer period whilst also enabling far more clients to obtain cover than increasing non-medical limits would.
Things to reflect on for CPD:
- How will this help you with your business protection applications?
- Will this mean you are likely to recommend Royal London more for your business protection cases? For which demographic of clients?
- What other protection innovations would be helpful for your business clients and why?