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Understanding the Insurance Underwriting process

Previously if you were diagnosed with either HIV or Diabetes, that was a barrier to getting any form of life insurance

If you have ever applied for a life insurance policy, you may or may not have come across the term underwriting. While you may not be aware of what this term means, it does have a very important effect on your insurance application. Simply put, underwriting means no surprises.

Insurance Underwriters are the people who decide whether to accept or reject an individual's application for an insurance policy.

Underwriters are required to follow an often-changing list of underwriting rules and procedures, that in combination are designed to put an overall 'dollar value' on the different types of risk that people with complex health conditions, changing health conditions, hard-to-insure occupations and smoking and vaping habits.

What's measured?

In the same way, different types of jobs have different levels of risks, not every person presents the same degree of risk to a life insurance company. That's where understanding underwriting comes in.

For example, if you're 30 years old and in good health, you would be considered at a significantly lower risk of suffering an early death than someone who is 60 years of age with a poorly managed health condition. While there are no certainties in life and a younger person could die earlier than an older person, life insurance is based on calculable risk and that is exactly what underwriters do.

The underwriting process

The underwriting process is really about measuring long-term patterns in large amounts of statistical data. In general terms, it’s all about balancing different risks and trying to measure the possible effect of a particular issue happening earlier than statistically expected. This is so the insurance company can attempt to balance any increased potential risk with an increase in premiums to cover that risk.

For example, people who smoke pay a higher insurance premium to balance out the increased chance that they might claim earlier than people who don’t smoke. The same approach is taken for people diagnosed with well managed HIV or Diabetes.

Is it ok to discriminate based on sexuality or lifestyle?

No. It’s important to know that today The Disability Discrimination Act makes it illegal for Insurance Underwriters to make assessment decisions that are not reasonably or statistically based.

This means that a person’s lifestyle alone can never be the basis for an underwriting decision. (For more information about these issues, see our list of Frequently Asked Questions here).

So when your application for life insurance is completed, the application goes through to an Underwriter for assessment. The Underwriter then uses this information to get a big-picture view of the different factors in your application, and on the basis of those factors, your level of risk is determined and the price calculated.

Factors that insurance Underwriters typically consider in an assessment

  • Your age and age at the time of diagnosis of any medical condition.
  • The type of occupation you might have.
  • If you plan to travel to countries with limited health care options.
  • Your current health and pastimes.
  • Your degree of success with managing any pre-existing medical condition.
  • Your immediate family's general health history (to the best of your knowledge).

To complicate matters further, the underwriting standards are different for every life insurance company and change constantly due to a range of technical, medical and commercial issues.

So now you can see why you need a specialist risk advice service from working for you if you want the best chance of success.

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About Us provides support to those people who insurance companies leave behind. We believe in giving every person the power to use life insurance products to protect & provide for their loved ones, their businesses and their legacy — free from barriers of stigma and discrimination.

We know that, as an LGBTQIA+ person (or someone who goes without labels entirely), you have specific financial advice, life insurance and privacy needs.

We're committed to serving the LGBTQIA+ community and its Allies. For us, it's about #AdviceEquality.

Make us part of your story so should the unexpected happen to you or whoever is family to you, you'll have a backup plan in place to help you financially recover and life can still get better for somebody you love.


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