The crucial role of underwriting in insurance

Johannesburg - Annually, insurers such as Liberty pay out billions in claims, providing vital assistance to clients in their times of need. However, a small portion of claims do not get paid, primarily due to inaccurate or absent information submitted during the underwriting process.

"More often than not, the underwriting process in insurance is misunderstood to be exclusionary when, in fact, it is the opposite," says Liberty’s Managing Executive for Retail Solutions, David Jewell.

"Underwriting is a standard process in the insurance industry. It is a term used to describe the assessments clients undergo when applying for an insurance policy, particularly life cover. This is to ensure that the cover is equitable and appropriate in terms of benefits and affordability," Jewell adds.

Last year, Liberty paid out R6.98 billion in claims, primarily from its flagship Lifestyle Protector cover, as well as from other retail life insurance policies. More than 94% of all claims were paid out, while only 5.2% were declined due to the claims not meeting the necessary requirements and 0.3% was due to material non-disclosure. This month also marks 20 years since the inception of Liberty’s Lifestyle Protector.

What should you disclose?

The disclosure of all information during the underwriting process has many positive effects. But Jewell believes more can be done to educate consumers on the role they can play in ensuring they get the most from their insurance cover.

For clients, an understanding of the underwriting process is key, as is disclosing their risk factors appropriately because this impacts their ability to successfully claim on their insured benefits.

"Full disclosure during the underwriting process gives you peace of mind in that, having disclosed everything you should, you can reasonably expect a successful claim outcome should an adverse event happen that changes the quality of your life. It is important to note that we assess risk at a point in time, considering what is known at the time of application," adds Lisa Gibbon, Liberty’s Divisional Executive for Onboarding.

Gibbon explains that at policy inception, potential clients are asked many questions, related to their medical and financial health, and also to their occupations, lifestyle and hobbies. This can be completed with the assistance of the financial adviser or by a tele-underwriter. Sometimes, people omit certain information during this stage, and this might impact the claim stage.

"This is pertinent information relating to their health, finances, lifestyle, or occupation. It is best to disclose everything," says Gibbon, "and let the insurer decide what is important or not."

Liberty underwrites once – at policy inception

Gibbon adds that clients need to go through underwriting only once at Liberty, except in an instance where the client requires additional cover.

"Once covered, even if their health changes, a client will not need to go for additional health checks year on year. However, any additional policy benefits will require underwriting," says Gibbon.

Repudiation of claims

"One of the major issues linked to not disclosing pertinent information is that at the claim stage, this may be picked up, resulting in repudiation of a claim and then the very essence of insurance is not fulfilled," says Boitumelo Mothoagae, Divisional Executive: Claims Management at Liberty.

Claims are repudiated for reasons such as the medical condition not being covered or not meeting the criteria for a valid claim, exclusions being applied, discovery that crucial details were not disclosed at inception, or the policy is inactive at claim stage, says Mothoagae.

The most important thing is selecting appropriate cover, and this is best achieved with the help of an accredited financial adviser, who will assist with the initial application.

"Providing the right information accurately and without omission is what we advocate for at Liberty, and if you are unsure, check in and, more importantly, familiarise yourself with the terms and conditions of your policy," she adds.