Enhanced underwriting - common questions answered

Enhanced underwriting – common questions answered

There’s a lot of unanswered questions about many aspects of the protection insurance industry. This blog aims to answer some of the questions we come across about underwriting.

Why is insurance underwriting important?

Underwriting is super important, and without proper underwriting the protection insurance couldn’t be as it is today. Underwriters are the ones who will decide what terms to offer an individual, and these terms will be based on a variety of factors, such as their age, occupation and health. 

Statistics and a whole load of research goes into deciding the terms which are given out. Actuaries (people very smart with numbers) sit within insurers and look at data that spans decades, to figure out the “risk” of an event happening.

Basically, an insurer will look at how likely you are to make a claim on your policy. A person in their 20s with no health conditions and no hazardous occupation or hobbies is less likely to make a claim on a 20 year policy than a person in their 50s with existing medical conditions. That’s not to say that the 20 year old won’t make a claim and the 50 year old definitely will, life is unpredictable.

Insurers must have the right financial reserves to pay out claims to existing policyholders, to fulfil the promise to them that the money will be there when needed. That means that the way that insurers currently work, is that they ask people that are more likely to claim pay more for their cover. 

The easiest way to think of this is if we just look at age. Let’s say that you have two people and neither of them have any specific risk factors. One is 25 the other is 80 and they both want the same insurance. The 80 year old will pay a higher premium for their cover as the insurer is much more likely to pay out a claim to them, than the 25 year old.

When deciding an insurance premium, what does an insurance underwriter take into consideration?

Different insurers and underwriters might have slightly different questions, but many will look at roughly the same things. They will want to know your age, medical history and family medical history, occupation, if you take part in hazardous occupations and if you travel extensively.

Your age plays a big role in the amount you will pay, check out our Value for money blog, that gives examples of how much the price can increase at different ages.

With underwriting we often think about health risks and others mentioned above, but there is also financial risk too. When someone is wanting a high amount of insurance, insurers can often want a medical to be completed, that is typically arranged at their own expense. Underwriters will consider your age and the amount of insurance that you are applying for, to determine if this is needed.

What are insurance underwriting guidelines?

The insurance underwriting guidelines are used to help decide the premium. For example, these might say that a person of a certain age will have a base premium of X, or a person with a certain health condition might see the basic premium increased by Y amount as a starting point. 

An underwriter will use the information you have given alongside the underwriting guidelines to determine the terms.

Will insurance underwriting be automated?

There are many online services which use automated underwriting. At Cura, many of our clients’ applications will go through enhanced underwriting, meaning that each application is individually assessed by a real person.

Automated underwriting can be a good thing for many people, as it can allow for instant purchase of insurance. But it can also end up a bit of a computer says no situation, with some medical conditions. This might sound annoying but for conditions like autism and mental health, both of which can be really misunderstood, having a human underwriter look at your application can be beneficial. They can see you rather than just a tick box system.

How long does insurance underwriting take?

This can be tough to answer, as it can vary massively. We have applications which can be started straight away, and applications that may take a couple of months if evidence is requested from doctors or medical professionals. The time on this can vary quite a bit with some GPs completing reports manually (average of 8 weeks) or using an eGPR system (average of 1 week).

What is the insurance underwriting process?

When applying for protection insurance, your application will first be reviewed by the online system to see if the insurer can accept it, if it can’t it will go to an underwriter to be assessed. Once they have initially looked at your application, they will decide if any further information or evidence is required before giving any terms. 

Extra evidence can include:

• Tele-interview
• Nurse’s screen
• GP medical report
• Specialist’s report

   

Once any further information or evidence has been received back, the underwriter should have all of the information that they need to make a decision on your application and potentially offer you terms. 

There are times where further information or evidence isn’t required, and the underwriter will be able to make a decision on your application straight away. Our job is to find the insurer that is going to be able to support your application as quickly as possible. Please get in touch so that one of our advisers can help you to arrange the insurances that you need.

Related blogs

What are the benefits of enhanced underwriting

Answering the public’s common questions – life insurance edition

The insurance application process in 3 steps