Underwriting at time of claim is a serious problem.

We have all seen the TV ads selling direct insurance to you, that “don’t want to hassle you”, have “no medical tests” & have “no underwriting”, that makes it simple & easy for you to obtain insurance to protect your family.

However, as we have seen over the years, this can become a real problem at time of claim. When people think they have insurance and it may well not be the situation when tragedy strikes. Our Newcastle Advisors believe that there is a serious problem, when families take out their direct insurance thinking that the family is covered.

Generally the underwriting process can occur before the application or after the claim. Underwriting is used to determine the cost an individual pays for insurances.

Insurance companies operate in the realm of risk, not simply because they insure against risky situations like diving, racing cars or rock climbing, but because they are taking a risk that they may lose money by having to pay a large sum if a claim is filed. Recognising the risk of potential claim payouts is an important step in the insurance company’s decision to provide coverage. To recognise this risk, insurance companies engage in what is known as underwriting.

There are three main factors that may affect a person’s risk of dying or becoming disabled;

Age - older people are generally at a higher risk than younger people. Within any age group, the probability of claiming may be greater for some applicants over others.
Gender - women on average tend to live longer than men.
Personal medical history - past & current which can also indicate a level of risk

Smoker status, occupation, family history, lifestyle & pursuits are also important factors that affect the chances that a person will make a claim.

For those people who are higher risk, insurers may request higher premium for cover or exclude certain risks from the policy offered, or may offer a different or modified form of insurance. Insurers can also decline to accept a policy application.

However, some insurance companies engage in post-claim underwriting, where no attempt to recognise the risk posed by an applicant before agreeing to insure them. Rather, the insurance company simply issues a policy with little to no investigation or inquiry into the client. This allows the insurance company to immediately collect profits on the premium paid by the applicant. They will continue collecting these profits, having expended very little effort, until a claim is eventually filed for by the insured. It is at this point—post claim—that the insurance company will launch an all-out investigation searching for any reason to deny the claim. This is how post-claim underwriting works to prevent deserving, paid-in clients from reaping the benefits they have been paying into.

For example, a bloke takes out insurance, he dies of a heart attack, they check out his history and they find that at two weeks of age the baby has had a valve replaced in the heart so the insurance company are not paying the life insurance to his widow.

Many insurance providers underwrite at time of application, however this is not always the case.

A recent ASIC findings has revealed seven superannuation funds have been found to have been charging extra premiums after classifying new members as ‘smokers’ by default.

These super funds included some of the biggest funds; AMP, Colonial First State, Equity Trustees, IOOF, OnePath, Intrust, Netwealth & Suncorp.

If the underwriting process was undertaken at the time of application, these super funds would not have been charging excessive premiums for several years.

Our Newcastle Advisors recommend that you seek professional financial advice, to ensure you family are protected.

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Our Newcastle financial planners also have offices in Sydney and help clients across the local areas including Newcastle Financial Planning(Merewether financial planning, The Junction financial planning, The Hill financial planning, Bar Beach financial planning, Newcastle West financial planning, Hamilton financial planning, Adamstown financial planning, Redhead financial planning, Whitebridge financial planning, Kotara financial planning, New Lambton financial planning, Mayfield financial planning), Maitland Financial Planning (Morpeth financial planning, Lorn financial planning, Rutherford financial planning, Aberglasslyn financial planning, Metford financial planning, Beresfied financial planning), The bay (Medowie financial planning, Fern Bay financial planning, Fullerton Cove financial planning, Anna Bay financial planning, Nelson Bay financial planning, Shoal Bay financial planning, Tea Gardens financial planning, Hawks Nest financial planning), Lake Macquarie Financial Planning (Cardiff NSW financial planning, Glendale financial planning, Speers Point financial planning, Fennell Bay financial planning, Bolton Point financial planning, Coal Point financial planning, Toronto financial planning, Valentine financial planning, Belmont financial planning, Eleebana financial planning, Warners Bay financial planning, Redhead financial planning, Caves Beach financial planning), Hunter Valley Financial Planning (Muswellbrook financial planning, Scone financial planning, Pokolbin financial planning, Cessnock financial planning, Singleton financial planning, Broke financial planning, Rothbury financial planning), Central Coast Financial Planning (The Entrance financial planning, Bateau Bay financial planning, Berkeley Vale financial planning, Tuggerah financial planning, Wamberal financial planning, Terrigal financial planning, Erina financial planning, Avoca financial planning, Gosford financial planning, Woy Woy financial planning, Picketts Valley financial planning) & Sydney Financial Planning (Castle Hill Financial Planning, Rouse Hill Financial Planning, Dulwich Hill financial planning).

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