Simplified underwriting has been decried as a catch-all that never rejects anyone. Insurers couldn’t disagree more.
Insurers take precautions to avoid unpleasant surprises, says Canada Protection Plan (CPP) Regional Vice-President, Sales, Québec Centre, Alain Plante. “If someone answers no to a question about illnesses we will check with MIB to see whether they were declined by another insurer because of a myocardial infarction. We will make a follow-up call to find out if they had this illness in the last five years. Their answer may have been right because the questionnaire does not screen for a condition that dates back more than three years for insured under age 55, and more than two years for insured ages 55 and over,” he explains.
This method speeds up claims processing. “We won’t need to do a check for the infarction because it is already entered in the insured’s file. The purpose of the MIB check is to accelerate the process. We are there to pay. The more effective the risk management, the more affordable the insurance products will be,” Plante says.
Furthermore, some clients do not tell all, but not necessarily out of bad faith. He invites advisors to support their clients to ensure that they are answering the questions properly.
“Someone contracted hepatitis C. He says he had it years ago. But an MIB check shows that the person was denied life insurance because of cirrhosis of the liver, a frequent consequence of hepatitis C. Can the person claim to have recovered? Impossible — the liver cannot heal itself. The person thinks he is cured but actually suffers from a chronic disease. His life expectancy is reduced as a result. He needs to answer yes to that question.”
Plante adds that in these situations it is crucial to contact the underwriter, who can provide answers in writing. He says his company’s long-term claim settlement ratio is 98 per cent.
Pierre Vincent, Senior Vice-President, Individual Insurance and Sales at iA Financial Group, confirms that this rate is close to the industry average. He adds that it does not take into account false statements or fraud discovered at claim time, or death caused by suicide within a 24-month period. “When people transmit truthful information, it is very rare that benefits are not paid out,” he says.