Exclusions are one of the most important elements of life insurance policies, but they are also one of the most misunderstood. It’s vital that clients know about any exclusions to their policy, as they are especially key at claim stage.
When explaining life insurance exclusions to clients, I often use the analogy of getting insurance for your car. Before you can get cover for a vehicle, an assessor has to evaluate your vehicle and identify any existing issues, such as scratches or dents. These issues are listed as exclusions to your car insurance policy and, if you claim later, the claim cannot include the problems that existed before you got the cover. Life insurance works in a similar way.
Clients need to understand that insurance is all about covering you for a future uncertainty; it is not about cover for an existing certainty. By purchasing a life policy, clients are guarding themselves against the uncertain future events of disease or disability and their financial impacts. When assessing how risky it is to insure someone, insurance companies take into account a person’s health at that particular point in time, their past illnesses and their family history. To manage this risk, the insurance company may opt for premium loading, or even exclusion in certain cases, where the risk of someone having a certain health condition in the future is extremely high.
An exclusion needn’t be a life sentence
It is this possibility of exclusion, of course, that clients are most worried about. This fear can result in non-disclosure, which will inevitably mean the denial of a claim if the client is found to have omitted crucial information, even when what they are claiming for is unrelated to the non-disclosure. The Ganas and Momentum case in 2018 is a good example of this.
Clients should therefore be made aware of the fact that some exclusions can be reconsidered at a later stage. For example, someone who is pre-diabetic, obese and has an unhealthy lifestyle may be denied cover for diabetes-related illness or death. However, should that person lose a lot of weight, maintain a healthy diet, and reverse their diagnosis, then their health can be re-examined and their exclusion reconsidered at a later stage.
Sex, drugs and rock ‘n roll
Non-disclosure isn’t just fuelled by fear, though. It can also be the result of embarrassment. Financial advisers often have the unenviable task of having to complete lengthy and intimate insurance documents with their clients. Because these documents often ask for details around embarrassing personal details such as drug usage or sexually transmitted diseases, clients may sometimes skirt around the truth.
This is one of the reasons why we at BrightRock give you the option of tele-underwriting for most of our polices, where our call centre agents get in touch with your clients and ask those embarrassing questions for you. We have seen this result in a much better claim experience and, best of all, it transfers the risk to us rather than you as a financial adviser.
The power of the financial adviser
Another important aspect that clients should be informed of when it comes to exclusions is your influence as an expert in your field. Those advisers who work with BrightRock will know that we view you as partners and we welcome your opinion as advocates of your clients and experts in your field. We often work with advisers in devising exclusion solutions that are more favourable to the client. For example, a client might have severe degeneration in a disc in his back, which might prompt an insurer to want to exclude all claims resulting from a back injury. The adviser could negotiate that the exclusion only apply to further degeneration of those specific discs, and so if the client were to hurt his back in a car accident then that would be covered. BrightRock is continually re-examining our risk rules and working with international experts to ensure our policy restrictions take into account the most up-to-date thinking around exclusions.
Exclusions are a very emotional aspect of our business, which makes it even more vital that clients understand them. They need to know the purpose of exclusions, and not make any assumptions around them that could result in a claim not being paid. The best life cover for your client, as always, is ensured by working closely with both the insurer and the client.