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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I think the key word is Different, not inconsistent. These are different companies with different cost structure and risk appetite. Don’t expect the same result. Actuaries deal with probabilities & the element of judgement & perceived risk will lead to different outcome. Inconsistent is if same person profile given to same co and you get differing costing or loading. Then, it is inconsistent.
As far as a client is concern, the vastly ‘different’ outcomes is highly alarming. I think MAS should step in to regulate the manner cases are underwriten.
There is hardly any resemblance in the outcomes. Like monkey throwing darts.
Since 2006 NTUC actuarial guidelines are stricter than before. But at end of day it still depends on individual judgement and calculated calls by the actuaries and the managers. I remember got cases where clients had/has benign breast lumps / uterine fibroids etc. and the underwriting dept imposed loading and exclusions. I had to argue with medical scans, lab results, letters from specialists, >5 yrs >10yrs without any issues, etc etc. The underwriting dept eventually relented with no loading & no exclusion for some cases, while reducing loading to about 20% to other cases and no exclusions. But these were few years ago, now not sure if same people in underwriting dept. It’s more like a grey area woolly thing based on subjectivity rather than objective scientific approach, even though all actuaries and insurers will quote you statistics and probability studies till the cows come home. It’s subjective coz of business & performance pressures, balancing profitability & revenues versus losses and risks. All insurers track the claims experience of the various products — wholelife, endowment, term, general, car, etc and uses it as the main KPI for underwriting depts. When your salary increment, bonus, and even your job security depends on it, it becomes quite tough to be scientific & objective.
The funny thing is that they had (still have?) different people & guidelines for medical insurance i.e. incomeshield products. Those same clients almost never able to get normal incomeshield coverage even though Life Dept agreed on no load/no exclusion. I often told those clients to go other insurers — where their medical insurance may be slightly more expensive, but they can still accept with good evidence. E.g. I had a guy with minor & stable hypertension, on long-term meds — as usual rejected by NTUC for many body systems from head to toe. Told him to check out Aviva & GE & others — end up GE accepted all his specialists letters & lab results & offered him normal supremehealth shield terms and he paid for private hospital coverage.
Actually the approach (their risk level) of the companies will affect the underwriting too. Certain conditions company A, B, C will have exclusion while company Z has no exclusion.
Cause in this industry, it is all about risks. To Company A, B, C these conditions are very risky to them, that why they put an exclusion on it.
And for some condition which TM/Aviva are able to cover it, the next policy for this particular assurer will be covered much easier.
And it is impossible to create a standard for underwriting. Cause firstly are the approach of companies are the same,? 2ndly do all company focus on reducing expenses and give clients much more benefits??
3rdly, there is no prefect solution.
So it is the adviser job to assist the clients and source what is best for them.
And personally I dont like the idea that you emphasis that client must be pay you for such service. If like that saying, certain companies’ advisers are not paid that high but they still help their clients. Felt very disgusted with that comment of your.
We want the best outcome& very little variations in between. IN that case, we should propose for a govt. linked or govt-led insurance scheme. All these companies are profit driven , & why should they give you the same outcome unless there is perfect competition where there is clearly not?
IFA should be more careful in looking at client’s situation & different offerings by private insurers.
Crying over different outcome & asking for govt intervention will not help to build Singapore as a financial centre.