Ask an Expert: How do insurers in the Australian market approach underwriting for CI riders when the applicant isn’t the main life insured?

Q: How do insurers in the Australian market typically approach underwriting for Critical Illness (CI) riders when the applicant is the policyholder or a supplementary insured (rather than the main life insured), particularly when the cost of medical testing may exceed the rider premium?

A: Firstly, my response to your question are my own personal views and not necessarily the views of my employer.

The product itself is unknown to me in the Australian market. Life insurance policies protect a life insured and alterations to existing cover or additional covers can be applied to cover only that life insured. Despite this, there are still some options to consider for the situation described.

Some life insurers might have a minimum premium or minimum sum insured amounts to ensure that costs in the underwriting, administration and any claims processing are covered by the premium received.

Full medical check-ups or medical examinations can be expensive and so are usually reserved for high sums insured.

For a medical condition like thyroid nodules, an examination may not reveal anything that has not already been disclosed in the personal medical statement.

It may be worth considering the following:

• What information do underwriting guidelines require in order to rate for the medical condition?
• Has this information been provided via the personal medical statement?
• If not, can the life insured be contacted to ask some additional questions, either via a questionnaire or via a recorded telephone call?
• Can the life insured provide copies of their most recent medical tests and/or investigations? 

It is quite possible that the life insured has the information needed and the underwriter should consider making contact before proceeding with any medical examination or treating doctor report. 

There should be balance between the level of cover and premium, the level of risk presented, the life insurer’s risk appetite and the cost of additional requirements.

Part of an underwriter’s role is to evaluate this balance and decide on the best next step that benefits both customer and business and achieves a sound underwriting outcome.

Attributable to John O’Leary,  Underwriting Quality & Training Consultant

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