Causes of Death and Non-Underwritten Products

A little while ago we blogged about the causes of death, the main causes do not change a lot in short periods of time, so the table below, based on Ministry of Health data from 2011, is still a good views of the main causes. The reason for returning to this is to consider the causes of death in relation to the exclusions common in non-underwritten policies. 

Pre-existing conditions, whether with a blanket cut-off at application, or with the ability to include them after five years without recurrence or treatment, are most likely to affect the categories of cancers, heart attacks, strokes, and respiratory diseases. What proportion of these causes are likely to emerge from a pre-existing condition or pre-disposition?

Now look at some of the other categories - take accidents, at 15% of the causes of death, and recall the exclusions relating to heights, speeds, presence on a building site, and certain occupations. 

Lastly, look at the rate for suicide, which might also be considered a death from depression or mental illness, this is one of the top five causes of death at 8% of this group, exceeding the level for strokes. Many of the non-underwritten policies contain long suicide exclusion clauses (up to five years), and increasingly bank insurers are lengthening their exclusion clauses as well (up to three years). 

These are the factors behind the recent changes made by Quality Product Research to the increased penalty for pre-existing conditions exclusions in the product quality database for Momentum Life and ASB Easylife. Other non-underwritten products will be added to the database and scored along similar lines. 

 

Causes of death top five 30 to 54


Momentum Life, documents, rates and more

Momentum Life is a brand that sells a Fidelity Life insurance policy (in New Zealand). They sell through online lead generation, and then call the customer back. The product is a non-underwritten insurance policy with an extensive set of exclusions including: 

  • pre-existing conditions
  • occupations
  • heights
  • depths
  • speeds 

You can access a policy document at their site, or at this link:  Download MomentumLife_Life_Insurance_Policy_Wording and you can take a look at their exclusions document too: Download MomentumLife_Life_Exclusions_&_Limitations.

We're pulling together a price comparison right now, which will be added to our bancassurance and direct premium comparison tables. However, this is expensive when contrasted with underwritten cover. That explains, perhaps, the reluctance to quote online. It must be remembered that this is a convenience purchase, and like comparing convenience food, to shopping at the supermarket, it comes with a cost. One case we priced recently is 67% more expensive than Fidelity Life's underwritten price for the same cover. That gap is similar to the premium difference between Sovereign's TotalCare and their Simple Life. 

A preliminary look by Quality Product Research rates them as follows (assuming a male age 45, occupation class 1, self-employed, taking out $500,000 cover) 

  • Sovereign (underwritten) 105.04 points
  • Fidelity Life (underwritten) 105.55 points
  • ASB / Sovereign Simple Life (non-underwritten) 93.87 points
  • Momentum / Fidelity (non-underwritten) 99.15 points

 


Call to Change Insurance Law to Stop 'Ruined Lives'

Susan Edmunds reports on Stuff.co.nz that

'According to the Insurance and Financial Services Ombudsman New Zealand needs a law change to stop people "ruining their lives" by not disclosing relevant information to their insurers. It is believed that many cases of a declined claim the insurance had been bought online and that insurers should be doing more to highlight to consumers what is required.'

My first thought was that the industry appears to be moving in the opposite direction. The use of more non-underwritten product makes claim decline for an existing medical condition much more certain than it would be for a fully underwritten product - even with the risks of non disclosure.

On the other hand, an adviser friend felt that more non-underwritten product was helpful. A person with a health condition that they did not wish to disclose (sometimes out of fear, forgetfulness, or embarrassment)  that would be excluded would be focused on that by the exclusions explanation, instead of thinking that they could 'get away with it.

Either outcome depends heavily on how advisers discuss the duty of disclosure in fully-underwritten cases and how salespeople use non-underwritten products in comparison. Given the outcome is so predicated on likely practice I would be interested to hear from advisers on the subject. What do you think? What have you found from clients that have been sold non-underwritten product?

Click here to read Edmunds' full article.