With customers facing financial uncertainty and most medical screenings off the agenda, how can insurers keep protecting families against financial shocks? Emily Perryman reports
As COVID-19 continues its grip on the health and lives of the nation, protection providers face the difficult challenge of ensuring people can still get cover while avoiding taking on unmanageable risks or adding to the burden on the NHS.
The past few weeks have seen insurers apply COVID-19 exclusions, introduce restrictions for high-risk customers and delay applications from people suffering symptoms. More positively, insurers are looking at ways to ensure those suffering financial hardship don’t lose cover and are being more creative in how they collect medical evidence.
It is a difficult time for advisers too, who have the tricky task of sifting through wads of COVID-19 updates to try to determine how their clients could be affected.
“In unprecedented times like these, communication is absolutely key and the winners and losers from an insurer standpoint will be judged on how they have kept advisers informed,” says Adam Higgs, head of research at Protection Guru.
“It is completely understandable that insurers may have to tighten up their processes, meaning some clients may not be offered terms and certain features such as short-term deferment periods on income protection might need to be removed. However, advisers need to understand where the lines are drawn. If this has not been communicated effectively, then the adviser could be put in an embarrassing position with their clients where they do not have the necessary answers – and this is not something they will easily forget.”
So far COVID-19 exclusions have been limited to the income protection (IP) space. British Friendly introduced a coronavirus exclusion for all new applicants from 14 March; The Exeter has a 12-month respiratory illness exclusion for new policies with a day-one or one-week waiting period; and Cirencester Friendly is applying an exclusion for COVID-19 related conditions and other respiratory tract infections to new applications with an eight-week deferred period or less.
LV=, on the other hand, has chosen not to introduce exclusions to its IP policies because it believes taking such action “risks unintended consequences that might mean consumers are unable to access cover, or applies unnecessary limitations”. In fact, before the government stepped in with additional support LV= even paid some self-isolation only personal sick pay claims. To date, it has paid out on over 140 short waiting period COVID-related personal sick pay claims, with the money in customers’ bank accounts within a few days.
The life and critical illness market has steered clear of introducing specific COVID-19 exclusions thus far, however some insurers are taking a cautious approach to high-risk customers. Royal London, for instance, says it has temporarily changed the underwriting position for some higher-risk customer groups, which means cover may not be offered to individuals who have existing health issues.
Many customers might find their protection application is postponed as a result of new underwriting procedures being put in place.
LV= says applicants are now required to disclose if they have tested positive for coronavirus, been advised to self-isolate or had symptoms. It will postpone applications for “a short period” if the applicant has tested positive, is displaying symptoms or is living with someone who is.
Similarly, Royal London will postpone cover for a minimum of one month if a customer has a history of symptoms, self-isolation or a positive test in the last month. The postponement will last until the customer has had a negative coronavirus test or the self-isolation period has passed, symptoms have fully resolved and they no longer require any treatment or follow-up.
Some insurers require applicants to disclose whether they have been “in contact” with the virus. However, Legal & General says people whose contact is a result of being a key worker will be allowed to complete their application and “it will be reviewed rapidly and sensitively on a case-by-case basis by our most experienced underwriters”.
In most cases, customers whose application has been delayed because of answering ‘yes’ to any coronavirus-related questions will have to re-apply and answer all the medical questions again once they’ve passed the insurer’s specified postponement period.
Even if a customer hasn’t had COVID-19 symptoms, they could still find their application being delayed or postponed.
The Exeter, whose life insurance policies are designed for people who have a high BMI and/or diabetes, says customers could see their application being postponed for up to six months because they are deemed more at risk of the virus.
Applications requiring medical evidence could also suffer delays. Protection providers have committed to an Association of British Insurers pledge not to burden the already overstretched NHS – this means GP reports should only be requested when absolutely necessary.
“Where possible we’ll underwrite applications without information from GPs, which includes seeing if customers have any copies of medical reports. Unfortunately, there will be some cases where this isn’t possible and we may not be able to complete some applications until we have this information,” says Craig Paterson, underwriting and claims philosophy manager at Royal London.
“We are reviewing our pipeline and for the small number of customers where we identify that we cannot consider cover due to the temporary changes, we will contact the adviser to indicate we will have to postpone our assessment. After the postponement period, we would require a fresh application to reconsider the application.”
AIG Life says that for sums assureds that would normally require routine medical evidence, it could look to underwrite cover at a reduced level. This level of cover could then be increased at a later date when medical evidence can be obtained.
Aviva has taken a different approach and, as of 27 April, has resumed requesting medical evidence for all relevant new applications and those in the pipeline. Cases requiring medical evidence from GPs make up around 14% of applications. “We previously stopped these requests on 24 March in order to reduce pressures on the NHS. Having monitored the situation closely, we’ve reviewed this decision and feel that we now have the required confidence to safely reinstate this process,” Aviva says.
Although some delays are inevitable, insurers are trying to underwrite more customers without seeking medical reports.
As a first step, LV= has increased non-medical limits by 10% for income protection, personal sick pay and critical illness cover. For a male under the age of 35, this means they can apply for up to £500,000 of critical illness cover without needing a GP report, tele-interview or medical screening – up from £450,000 previously.
British Friendly, meanwhile, has withdrawn its non-medical limits and so will no longer request evidence based on age and benefit alone. “This approach will be under review, but we feel this is a fair approach to take given the current circumstances,” it says. “This will apply to any pipeline clients and requirements will be cancelled as appropriate.”
Most insurers have expanded their use of virtual underwriting in order to obtain medical evidence when face-to-face screenings are not possible. The Exeter is piloting a virtual medical screening programme with Square Health and British Friendly has expanded its partnership with tele-underwriting provider Morgan Ash.
AIG Life says its virtual medical examination is likely to involve answering medical questions with a nurse over a video call and taking height, weight and a pinprick sample of blood, which will be sent to the lab for testing. An approved self-testing kit is supplied to customers in advance of the virtual examination and includes instructions on how it can be used and how samples can be dispatched to a lab.
A big concern among insurers and advisers is that customers suffering financial hardship might resort to cancelling their cover.
Some insurers are allowing policyholders to reduce or even stop premiums without losing cover. For many, it is simply a case of phoning the insurer who will decide what assistance will be provided on a case-by-case basis. Others have more defined procedures in place.
VitalityLife is letting members reduce the premiums they pay each month by 25%, 50% or 75%, but this comes with a corresponding reduction in cover. Similarly, AIG Life is letting customers reduce their premiums for six months while continuing to be insured but at a lower level of cover.
L&G is enhancing its payment grace period, which means that if a customer were to miss or cancel their payment, they will remain covered by their policy for 60 days. Customers need to restart payments and pay the missing premiums within 60 days to avoid changes to their cover.
British Friendly, meanwhile, has relaxed its premium holiday (career break) option whereby premiums can be temporarily suspended, and it has reduced the qualifying period from one year to one month’s premium paid. Members will be unable to claim while on a premium holiday, but they can re-instate cover when financially able to without needing to re-apply.
LV= is also offering a payment break to members who have a policy that’s been in force for 12 months or more, a good history of premium payment, less than three months arrears and have suffered a significant drop to their income.
Aviva, on the other hand, which isn’t offering premium holidays, says: “We appreciate some customers may be facing financial difficulties, and that some of our products have terms and conditions which do permit elements of premium flexibility. Customers with concerns about paying their premiums should contact us.”
Role of advisers
Advisers can play an important role in encouraging clients to retain cover by highlighting the importance of protection – especially during these uncertain times.
Debbie Kennedy, director of protection at LV=, says simply contacting clients to find out how they are and how they’re getting on can offer welcome reassurance. “We’re working with advisers too to keep them abreast of latest developments, how we’re adopting to make protection easer to apply for (right now) and helping inform their conversations with their clients,” she adds.
Royal London’s Craig Paterson suggests advisers can support clients by reminding them of the features and benefits of their policies, including added-value services that they may find useful during the pandemic.
“This unprecedented situation has definitely raised awareness of the need for protection insurance in a positive way,” says Paterson. “Going forward, we can reflect on how the industry has stepped up during the crisis, the ways in which we have provided good outcomes for customers who have claimed or used the added-value services. Providers are also learning from the situation which will help us to improve products and make our market stronger in the future as a result.”