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The Crucial Role of Underwriting In Insurance

 

More often than not, the underwriting process in insurance is misunderstood to be exclusionary when, in fact, it is the opposite

 

Annually, insurers pay out billions in claims, providing vital assistance to clients in their times of need. However, a small portion of claims do not get paid, primarily due to inaccurate or absent information submitted during the underwriting process.

 

Underwriting is a standard process in the insurance industry. It is a term used to describe the assessments clients undergo when applying for an insurance policy, particularly life cover. This is to ensure that the cover is equitable according to the client’s needs and appropriate in terms of benefits and affordability.

 

HOW MUCH IS BEING PAID OUT BY INSURANCE COMPANIES?

 

More than 94% of all claims were paid out, while only 3.7% were declined due to the claims not meeting the necessary requirements and 0.3% was due to material non-disclosure.

 

What should you disclose?

 

The disclosure of all information during the underwriting process has many positive effects. But it is believed that more can be done to educate consumers on the role they can play in ensuring they get the most from their insurance cover. For clients, an understanding of the underwriting process is key, as is disclosing their risk factors appropriately because this impacts their ability to successfully claim on their insured benefits.

 

Full disclosure during the underwriting process gives client’s peace of mind, having disclosed everything they should, they can reasonably expect a successful claim outcome should an adverse event happen that changes the quality of their lives. It is important to note that insurance companies, assess risk at a point in time, considering what is known at the time of application.

 

At policy inception, potential clients are asked many questions, related to their medical and financial health, their occupations and what it entails , lifestyle and hobbies. This can be completed with the assistance of the Financial Adviser or by a tele-underwriter. Sometimes, people omit certain information during this stage, and this might impact the claim stage. The information relating to health, finances, lifestyle, or occupation, is important – even it you think it might not have an inpact. It is best to disclose everything and let the insurer decide what is important or not.

 

Once covered, even if their health changes, a client will not need to go for additional health checks year on year. However, any additional policy benefits or upgrades in current cover, will require underwriting.

 

Repudiation of claims

 

One of the major issues linked to not disclosing pertinent information is that at the claim stage, this may be picked up, resulting in repudiation of a claim and then the very essence of insurance is not fulfilled.

 

There are different reasons claims are repudiated such as the medical condition not being covered or not meeting the criteria for a valid claim, exclusions being applied, discovery that crucial details were not disclosed at inception, or the policy is inactive at claim stage. It is therefor impotant to make sure your policy is paid up to date every month.

 

The most important thing is selecting appropriate cover, and this is best achieved with the help of an accredited financial adviser, who will assist with the initial application.

 

At Leseur Financial Services, we help with free quotations after conducting a comprehensive financial needs analysis to determine the client’s specific need. We also guide all our clients to disclose any health information in order to make sure they have a valid claim when needed.