Underwriting is the process by which the insurer uses to evaluate the risk and exposure of potential clients and assess their eligibility to receive coverage. In this process, they will determine how much coverage to provide, what is excluded if any, and thus the premium to be paid by the client. Each insurer has its own set of underwriting guidelines to protect the financial status of the company. There are 3 types of underwriting: Full Medical Underwriting, Continuing Personal Medical Exclusion (CPME) and Moratorium Underwriting.
Under FMU, applicants are required to submit a full declaration of their medical records to the insurer who will then verify with the applicant’s GP. Insurer will then make a decision to cover or exclude any pre-existing condition or name other conditions to exclude due to the potential of arising because of current condition. If applicant fails to disclose details of any past or present illness, should the illness arise in the future, insurer has the right to deny any claims.
Thus it is extremely important to be very thorough in your medical declaration. Some insurers may agree to cover pre-existing conditions at a loading, meaning, higher premium. This is dependent on various factors such as your state of health at application, the condition of your illness, when your illness appear, how long you have had it, etc.
With FMU, applicant will have to wait a period of time to know whether they will be covered or not.
If you want to switch insurer, maybe due to bad customer service, but you are suffering from a pre-existing condition that your current insurer is covering, your next chosen insurer will most probably use CPME to underwrite your policy. With CPME, applicant’s benefits and exclusions, if any, in the new policy will be similar to their old policy. In this instance, applicant will go through full medical underwriting. This process ensures continuous medical coverage.
With moratorium underwriting, coverage starts straight away.
Advantages
| It is stated clearly what will or will not be covered | Coverage starts immediately |
Premium may be lower for healthy individual |
No loading on premium due to medical history |
| Claims may be processed faster |
Pre-existing conditions that would be permanently excluded under FMU might be covered under Moratorium Underwriting if no claim is made for that particular condition during the two-year qualifying period |
| Have to wait a period of time to know whether one will be covered or not |
It is not stated clearly what may or may not be covered |
A loading may be added to the premium if a pre-existing condition is accepted |
Consumers may forgo required treatment for the particular condition during the two-year qualifying period in order for it to be eligible for cover. In doing so, they may be incurring medical cost and putting themselves at risk. |
Insurers may be overly cautious in their underwriting |
Claims may take a longer time to process |
