Analysis: individual PMI and moratorium underwriting

Moratorium underwriting has generated a lot of debate across the health insurance industry over the years. Sam Barrett finds out why it’s firmly back on the agenda.

Moratorium underwriting may have come under fire from the Office of Fair Trading in the past, but appetite for this form of underwriting never went away. And, although most insurers have always offered a choice of full underwriting or moratorium, WPA finally returned to the fold earlier this year when it reintroduced moratorium underwriting on its Flexible Health plan after a break of 13 years.

“We’ve been working more with advisers and they kept asking for moratorium underwriting,” explains Mark Southern, general manager, sales and marketing at WPA. “We still believe full medical underwriting is more effective as it provides clarity of cover but there is room for both.”

Its moratorium is in line with most others in the market. Any medical conditions the individual has suffered in the five years before the policy is taken out will not be covered for at least two years. Then, provided the person is free of symptoms, treatment, medication or advice for two continuous years after the policy starts, the condition will be covered again.

Popular choice

A number of reasons have made moratorium underwriting a popular choice. The speed and simplicity of the application process is a major factor. While you’ll face a 12 page application form, including six pages of health and lifestyle questions, if you opt for full medical underwriting on WPA’s Flexible Health plan, there are just eight pages for its moratorium application form, with the medical questions limited to details of smoking habits and the individual’s GP.   

Mike Blake, compliance director at PMI Health Group, the independent advisers, says this means moratorium underwriting can work particularly well for people with a clean bill of health.

“If there are no health issues, moratorium saves time and administration,” he says. “You could take out cover quickly, perhaps even completing the forms online.”

As well as appealing to those who haven’t suffered any health problems, moratorium underwriting also has a place for those who have had treatment in the past. Richard Kerton, head of medical insurance at PMI Partners, another intermediary, says he sees plenty of clients who can benefit from moratorium underwriting.

As an example of the type of health problem that can be treated more favourably by moratorium underwriting he points to knee arthroscopy, a minimally invasive treatment that can be used to treat many orthopaedic conditions such as torn floating cartilage.

“If someone had undergone this treatment just before they took out cover it would be excluded under full medical underwriting but, under many insurers’ moratorium underwriting, as long as they didn’t need the treatment or suffer any symptoms for two years, they would be covered again. WPA’s decision to introduce moratorium underwriting does open up its products to a wider market,” he adds.

The need to stay symptom, treatment and advice free for two continuous years means that long-term pre-existing conditions such as high blood pressure are unlikely to ever be covered but there are plenty of other health conditions that could be covered again. These include cataracts, joint replacements, providing it’s not a result of an underlying condition such as osteoarthritis, and the removal of moles and cysts.

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