The Interpretation of Medical Evidence in Underwriting

The use of personal health information and medical test results are important underwriting tools when it comes to evaluating an applicant for cover.  Dalene Allen, co-founder and Underwriting Director at Altrisk, explains how this data is used and why the interpretation of a GP versus that of an underwriter often differs.

Medical underwritingrefers to the use of medical or health status information in the evaluation of an applicant for cover.  As part of the underwriting process, health information may be used in deciding:

• Whether to offer or deny coverage
• The premium rate to set for the policy.

The purpose of underwriting is to ensure that individual differences between the risks in a pool are taken into account, in a manner that is fair to both the consumer and the insurer.

An applicant for life insurance will usually be asked to undergo a medical examination.  Depending on their age, the amount of insurance they are buying and the information supplied on the application form; the applicant may only have to undergo the standard battery of tests. These check for things such as liver function, cholesterol levels, smoker status, BMI and HIV/Aids.  However, if the applicant is older, has pre-existing conditions or a family history of a specific disease, it could warrant further investigation and additional tests may be required by the underwriter to accurately assess their risk profile.  The insurer may also request a report from the attending/regular physician.

A number of factors are statistically shown to affect the overall risk within a particular pool of insured lives, including:

• Age – for adults, the risk of dying (mortality) increases with age,
• Gender – on average, females live longer than men,
• Health – past illnesses and current health may affect life expectancy.

Other factors that could impact on the risk insured include lifestyle factors such as family history and occupation.    

What does the underwriter check for?

In evaluating the medical evidence, the underwriter is assessing whether the applicant has any health condition that could eventually affect their mortality — and hence their risk – compared with the statistics of a specific pool of insured individuals. The medical tests check for the presence of antibodies or antigens to the HIV virus; cholesterol and related lipids; liver or kidney disorder; diabetes; antibodies to hepatitis; prostate specific antigen (PSA); and immune disorders.

How are the results interpreted?

In the underwriting process, the underwriter makes use of extensive medical research, statistical data derived from existing insurance portfolios and underwriting manuals (provided by the reinsurers).  Insurers and reinsurers also utilise the expertise of specialists such as Chief Medical Officers (CMO), who advise underwriters in the interpretation of often complex medical information. 

An area that occasionally leaves brokers and clients questioning the medical findings reports is the difference in the health interpretation by a general practitioner or specialist doctor, and that of an underwriter.

There is one fundamental reason for this.  Usually, a doctor’s report will look at the patient’s current state of health. For example, at the time of underwriting, a 40-year old patient’s 6mmol/L cholesterol levels would be considered elevated. However, a doctor may not view them as reason for immediate alarm and the client would probably be sent off with a recommendation to improve their diet, exercise more, and retest in a year’s time.

However, based on the above example, the underwriter and the CMO will look at the longer-term picture and what the implications of an above average cholesterol level will be in terms of the applicant’s future mortality and morbidity.  In other words, the underwriter will assess based on the premise that the behaviour and lifestyle habits that led to the current condition will continue.  There could also be other extenuating factors that may be considered, such as being over the recommended BMI, a family history of heart disease and diabetes, smoking habits, and alcohol consumption.  All of these factors combined can very well deliver a different future state of health than that provided by a GP. 

On the flip side, it is important to note that while the underwriter’s decision and premium rate will be based on the current state of health of the applicant, it can be reviewed at a later stage.  It is in the client’s best interests to take the heed of their GP and the test results and change their lifestyle behaviour for the better to improve their state of health.  This done, the broker can then request a re-evaluation for their client which could possibly deliver a more favourable assessment and hence, a better premium rate.

A similar scenario that brokers often grapple with is when clients with the same condition each receive different underwriting decisions. It is important to remember that an underwriter makes an assessment based on the applicant’s individual profile and test results. So while two clients may seemingly have the same condition, the medical evidence will tell a different story. 

To illustrate, consider the example of two diabetics of similar age.  One may manage the diabetes well, be disciplined in medical care and check-ups, respond well to treatment and -  as a result -  have minimal organ damage and hence attract a loading of, for example, X. The second applicant may not manage their diabetes as effectively, and as a result, have significant organ damage, attracting a possible loading of Y. 

When assessing a diabetic, the underwriter will consider how long the condition has existed, how well it is controlled and whether any organ damage, or other contributing risk factors (such as obesity, smoking, or cardiovascular disease), exist. The person’s mental attitude regarding the management of their condition, determined through a questionnaire, also plays a role. 

In summary, the underwriters’ decisions are based on the complete package of medical test results, family history and lifestyle and what this combination bodes for the applicant’s future course of health.