Postponing life events such as buying a first home or starting a family means that people are often older when they take out protection. But with the likelihood of conditions such as type 2 diabetes, high blood pressure and obesity increasing with age, it can be a struggle to arrange life insurance.
Although the mainstream insurers will consider some health conditions, for instance a body mass index (BMI) up to 45 or type 2 diabetes, they are still fairly selective on the risk they will accept.
Alan Knowles, managing director of Cura Insurance, says: “Insurers are improving the way they cover some conditions, but if a client has type 2 diabetes and a high BMI it gets more difficult. You really struggle if someone has had a heart attack or cancer.”
The situation was made worse in September when Just announced it was pulling out of the protection market. Partnership, which merged with Just Retirement to create Just, had specialised in protection business for impaired lives. Its full underwriting approach enabled it to cover many people who had been declined by other insurers.
Filling the void
Although Just may be out of the picture, there are signs that other insurers are looking to provide protection solutions for this market. In April, Royal London and The Exeter both unveiled specialist life insurance products.
Royal London’s product, Diabetes Life Cover, enables individuals with type 1 or type 2 diabetes to access cover. By using insurance technology platform Kalibre, it is able to offer a simple and fast application process, assessing the risk and underwriting in less than an hour, as opposed to the several weeks that are the norm for non-standard risks.
The Exeter’s product, Managed Life, is initially available to people with type 2 diabetes or a high BMI, initially going up to 47 or 48 depending on the product type. While this is the first step, it is looking to extend the plan to other clients with health conditions who would struggle to get life insurance.
Steve Bryan, director of distribution and marketing at The Exeter, explains: “Protection is a crucial part of most financial portfolios, but for people who have experienced serious health conditions it becomes an even more important consideration. Most insurers target their cover at simpler-to-underwrite risks, but by extending Managed Life, we want to change this.”
Both providers also enable policyholders to reduce their premium if they improve their health status. On Royal London’s plan, a policyholder can see their premium fall by up to 40 per cent if their annual HbA1c test result indicates they are managing their diabetes. In addition, while premiums can increase again, there is a guarantee that they will never exceed the initial starting premium.
Premium lock-in
Similarly, with The Exeter plan policyholders can reduce their premium by up to 35 per cent by reaching annual targets. If the condition worsens, premiums can also rise by an amount agreed at outset.
The Exeter also offers a premium ‘lock-in’ feature. This fixes the premium for the remainder of the term if the policyholder reaches the minimum or maximum premium set at outset. This can usually be achieved in five years where steady improvements, or deteriorations, are recorded.
