I want to share with you the different underwriting standards practice by different insurers. Recently, I have a client, age 27, whom I helped her applied for insurance and the outcomes were all different. The insurance applications were part of the recommendations from comprehensive financial planning.
The client suffered from heart murmur. Her mother suffered from breast cancer, stroke and diabetes. Initially I applied for her NTUC Income iTerm with Living Rider. But when the underwriter counteroffered exclusion on breast cancer under Major Cancers and as well as added a loading, I felt that the counteroffer was a raw deal and decided to help her apply for another two more insurers. The following was what I found:
|Product||Final premium offered (annual)||Exclusions||Paper work|
|NTUC Income iTerm $150,000 + $100,000 Living Rider + Special Waiver 30 years term.||$726.50 (including 63.5% extra loading for family history & heart condition)||Exclusion on breast cancer for Living Rider and Special Waiver.||55 pages excluding arrangement for supplementary questionnaires and medical examination & ECG|
|Tokio Marine TM Enhanced Term Assurance $250,000. 37 years term.||$1,485.25 (including 49% extra loading for heart condition)||No special exclusion.||58 pages|
|Aviva Myprotector-Level Plus with Enhanced Dreaded Disease Accelerated Benefit and Enhanced Total and Permanent Disability all $250,000. 37 years term.||$919.50 (standard premium)||No special exclusion.||61 pages|
|Total paper work||174 pages|
It can be seen from above that different insurers have different outcomes. NTUC Income excluded breast cancer and as well as imposed a premium loading in part for family history (which include cancer of her mum). As she did not suffer from any breast abnormality, I find the underwriting outcome from NTUC Income to be unfair.
I decided to help her apply Tokio Marine and Aviva subsequently. The best outcome in this case turns out to be from Aviva. Aviva did not impose any premium loading and there was no special exclusion imposed.
Here are some points I want to highlight:
- Insurance companies’ benefits, premiums and even underwriting decisions are not the same. No insurer can claim to be the ‘best’.
- When applying for Aviva and Tokio Marine, I did declare that the client was already offered an insurance that has exclusion and premium loading. The fact that the client was already offered a non-standard life insurance did not prejudice the eventual outcome.
- The amount of paper work generated was huge. This case alone generated more than 170 pages.
- I had some problem explaining to compliance department what was going on. You see, the financial industry and MAS regulations focus on how the sales process is done. Much of these regulations were either developed by ex-sales people (who only focuses on selling) or those with no practical financial planning experience. The transactions for Aviva and Tokio Marine cannot be considered as ‘new sales’ but is an attempt to find a better deal. The original product recommended (NTUC Income iTerm) was so radically modified by the underwriter to the extend it was no longer suitable. However, regulations do not take into account of this problem that a product can be suitable initially but it can turn out to be not suitable eventually due to underwriting decisions.
- Next year in 2015, a new Balance Scorecard (BSC) will be introduced and advisers’ cases will be randomly sampled to check for any ‘problems’. Problems found would result in financial penalties based on a complicated algorithm which only a computer scientist can understand. Using this case as an example, it would appear that there are 3 separate cases although actually it is just one. This means it is not to the interest of the adviser to do what I did after all it means “more cases” will be audited and more questions will be ask despite it is actually just a single case.
- What many financial advisers would do when faced with sub-standard cases would be either to ask the client to lie about their family history and pre-existing conditions and/or bluff the client that the counteroffer is reasonable and would be the same for other insurers.
The case took 3 months to complete. Prior to the implementations, the financial planning took about two months. Hence, in total the entire comprehensive financial planning exercise took about 5 months. This is the reason why I charge a fee for doing such work. And my fee is not cheap. How can it be cheap for doing so much work?
If you are interested in financial planning, feel free to contact me via this link HERE.
Note: Pursuant to the Personal Data Protection Act, consent was obtained from the client for the publication of this article.
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