Advisers view exclusions with mixed feelings. For some clients, they are a blessing as an expensive rating would be prohibitive. For others, they seem completely unfair and business is often lost as a result. Underwriters must consider the impact of exclusions on sales and move with the times to help get more policies on risk.
Back exclusions are very common for income protec-tion and whereas some providers will always exclude the full spine, others, such as Friends Provident, will, where possible, exclude the specific area concerned, which is much fairer.
Some companies, such as Unum, are working to avoid exclusions in all but the high-est-risk cases and will instead rate or even accept at standard terms clients who would get an exclusion elsewhere.
Underwriting flexibility is also important. Where a client can afford a rating, however high it is, considering a rating instead of an exclusion could get the business on the books. The opposite is also true, of course. Where a rating is prohibitive, an exclusion instead could mean the client can take out the cover.
Bupa’s initiative to reduce premiums for clients who end up with either a cancer or multiple sclerosis exclusion on their critical-illness policy is one great piece of inno- vation which is at last gaining some momentum within the industry. Fortis followed, taking it a step further by applying the idea to mental illness and musculoskeletal exclusions on its income protection cover.
Axa announced it would introduce this at some point and LV= has recently joined the club, albeit just for cancer exclusions. I know another provider will be going live with this very soon. Premiums can reduce by up to 40 per cent, depending on the situation, which is a significant saving, I am sure you will agree. What about the others?
For several months now, I have been encouraging providers to follow Bupa, as I believe it is the right thing to do. Many applications never go ahead because clients feel they have been treated unfairly by being given less cover at the same price. Even clients who accept the terms are still left feeling a bit miffed. It is unrealistic to expect all exclusions to be priced up so that reductions can be applied but it would be good to see more exclusions over time looked at in this way.
Overall, providers have reacted positively to pressure on these points. Many under-writing managers have said they would like to introduce this but restrictive systems prevent them from doing so. I hope the necessary invest-ment will not take an age and that we see more providers coming on board with this over the coming months and using this treating customers fairly difference to win market share from their slower-moving peers.
Underwriters are so impor-tant to the sales process and I hope attitudes towards exclu-sions will continue to improve.