What are the types of underwriting for private medical insurance?
Underwriting is the term used by health insurance providers that refers to the use of medical information, to evaluate an application for coverage.
Private medical insurance is designed to cover mostly new and acute conditions. However, policies have different types of underwriting that determine which conditions are covered and which are not.
What is private medical insurance underwriting
It is important to understand your underwriting as this will impact on what you are and aren’t covered for. Depending on if you are new to health insurance or are switching health insurers, you will have different underwriting options available.
Moratorium underwriting doesn’t require you to declare your full medical history upfront. Instead it works on the basis that any conditions that you have had treatment, advice, medication, signs or symptoms of in the 5 years prior to the start of your cover are excluded. However, once you have completed a 2-year continuous trouble-free* period after taking out cover the can become eligible once again.
Moratorium underwriting is often used when someone starts private medical insurance. However, this is not the only time Moratorium underwriting can be the right advice. Sometimes (depending on your medical history) this can be a very efficient cost containment option, even if you have had private medical insurance for many years.
*trouble free is defined differently with different insurers. With all underwriting the important thing is in the policy wording. A slight change in wording can drastically effect your cover at point of claim.
Examples of when Moratorium underwriting can have different results depending on provider:
“Sarah is 40 years old and thinking about taking out cover for the first time. She had spinal surgery 6 years ago and has had no treatment since being signed off 5 and a half years ago. She has however been to see a specialist about a pain in her right hip in the last 12 months. Her specialist said that it was nothing to worry about but to come back if the pain becomes more severe in the future. The consultant put the pain down to wear and tear.
Option 1) Sarah has been offered moratorium underwriting from one insurer. The insurers wording suggests that the back problem would be covered from day 1 providing it is not related to the hip pain as she is more than 5 years clear of treatment, medication, signs and symptoms.
However the hip pain would initially be excluded because she has sought advice and had symptoms within the last 5 years. After a 2 year period with the policy in place she could meet several insurers definition’s of ‘trouble free’. This is because some insurers only require 2 years, treatment, advice and medication free from a pre-existing condition for it to become eligible again.
Option 2) Sarah has been offered cover with a different insurer who’s trouble free clause includes the wording “treatment, advice, medication, signs and symptom free” for a condition to become eligible again.
The cover on offer is similar in all aspects and is £15 cheaper than option 1.
However, due to the wording, this is not a good option for Sarah because the specialist said her hip pain was down to “wear and tear” which is a phrase often used when describing osteoarthritis.
Osteoarthritis is a condition that will not go away unless treated, normally via joint replacement. Therefore will most likely always present signs and symptoms. It would be very difficult for Sarah to successfully claim for this condition due to the wording on her policy.
It is clear that given the right advice someone in this situation would be much better off with option 1. However, if the client in question is not speaking to an adviser and is instead getting a non-advised service the client can often choose the most attractive premium. If you are considering this form of underwriting it is imperative that you seek advice before purchasing the policy.
Full Medical Underwriting (FMU)
Full Medical Underwriting will in many cases require you to disclose your entire medical history to the insurer. This then allows the insurer to provide you with a list of specific exclusions based on your disclosed pre-existing medical conditions.
Just because you have some pre-existing conditions it does not mean that by going down the FMU route it will always result in exclusions. It can vary from insurer to insurer as most have a different risk model. If you would prefer black and white terms from day one of cover this is probably the option for you.
To get an idea of the terms that would be offered from a range of providers please get in touch and we will be happy to explore options with the insurers most likely to cover your conditions.
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Continued Personal Medical Exclusions (CPME)
If you already have a health insurance policy in place and you are looking to switch health insurers, then you should almost always be given the option to switch on a continued personal medical exclusion basis.
This often means that your new insurer agrees to retain your current underwriting by continuing to provide cover for conditions that are not excluded from your current insurer. Each insurer has their own eligibility criteria.
Broadly speaking if you have not had a need to see a specialist or visit a hospital in the last 12 months, and you have no specialist appointments or visits to hospital booked in for the future you should be fine to switch medical insurance provider.
If you answer unfavourably to an insurers switch criteria this may result in new exclusions being added to your policy. We will only ever advise you to consider a new exclusion if it’s in your best interest long term. Sometimes this can involve an in-depth conversation with an adviser so that they can really get a good understanding of your needs and priorities going forward.
Continued Moratorium (CM) or Switch Moratorium
Continued Moratorium underwriting is available for those switching health insurance who were originally underwritten on moratorium terms. It allows you to continue your existing underwriting date to your new insurer meaning it is possible to carry over cover for conditions.
One thing to make sure of before completing a switch on these terms is to find out before you switch if the new insurer will apply their own moratorium terms or honour those of your existing insurer.
If you do not check before you switch you could find that you had met the “trouble free” clause with your previous insurer for a pre-existing condition. As a result by switching you inadvertently make satisfying the new insurers moratorium clause more difficult if not impossible.
Medical History Disregarded (MHD)
Medical history disregarded underwriting means just that; your medical history is disregarded.
Past medical history and pre-existing conditions are ignored from the moment the policy begins. Each member will be covered for any pre-existing conditions along with any new conditions that occur until the end of the policy.
It is important to note that like other types of underwriting Chronic conditions are not covered. MHD underwriting is typically only available on group policies (SME or Corporate) with a minimum group size of 15 employees.
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