If this is the first time you’re reading our electronic newsletter, then welcome………. if you’ve heard from us before, then welcome back.

Special Risk Insurance are experts in obtaining insurance for people who may find it difficult to get standard cover due to issues surrounding their health, occupation or lifestyle. We’ve created this publication to give you the latest information, tips and news to help you and your members obtain the insurance cover you deserve.

Please feel free to distribute this newsletter to friends, colleagues and members of your organisation. You can use the link to the left of this page, or contact us to link directly from your own newsletter or emails.

The focus of this newsletter is the Revised Insurance Guidelines, which were released by the Human Rights Commission (HRC) in December last year. Many interest groups made submissions to the HRC during their review of the guidelines, in an effort to improve the outcomes for ‘special risk’ cases. We’re keen to see the guidelines applied and to hear from individuals who have sought insurance recently and either benefited or not from their introduction. Please phone us on 0800 774 757 or email expert@srisks.co.nz with your story.

Kind regards

Brian Klee

Insurance Guidelines - what do we need them for?

‘These guidelines will help insurers and consumers understand their rights and meet their responsibilities under the Human Rights Act. They will assist in developing best practice throughout the industry so nobody in New Zealand is unlawfully denied insurance.’

Rosslyn Noonan
Chief Commissioner, Human Rights Commission

The new Guidelines are intended to cut out discrimination and provide peace of mind and a safety net for people who have experienced ill health or some other disabling situation and who seek insurance for mortgage, travel, income protection, etc.

In an industry often viewed as ‘mysterious’, the new Guidelines attempt to deal with the need for greater transparency and communication – to improve the public’s understanding of how insurance works. This is particularly important when a higher premium is charged, or cover is restricted or not available. The public has a right to know why they’ve been charged a higher premium or been offered limited cover, and when a review can be considered.

Central to the new Guidelines is that nobody is unlawfully denied insurance in New Zealand, and the Human Rights Commission has a complaints process set up for people to fall back on if they’re treated unfairly.

Three areas worth highlighting in the updated Guidelines are:

The Cost of Assessing Risk – who should pay?

Just as the Human Rights Act seeks to ensure people are fairly treated when they buy insurance, this needs to be balanced with the insurance industry’s right to charge premiums relevant to risk. Insurers have an obligation to protect ALL of their policyholders and must be careful when assessing people’s actual risks.

For people who don’t fit the standard criteria for insurance due to health or lifestyle issues, insurers need to collect additional information e.g. detailed medical notes, before a premium can be established. This is often a costly exercise. Added to which, if the applicant decides not to proceed with insurance cover, the cost of their assessment ends up being borne by the wider pool of people insured. Hardly fair?

The guidelines suggest insurers offset this cost by charging a higher premium initially, then reducing the premium when information about the actual risk becomes available.
In practice however insurers have tended to charge an upfront fee to cover the cost of assessment and, while this is acceptable, the guidelines state “the cost should not be at a level that effectively acts as a deterrent and could be perceived as a refusal to insure.”

Individuals with pre-existing medical conditions, disabilities or ‘special circumstances’, shouldn’t be surprised therefore if they’re asked to pay an upfront application fee or an increased initial premium, to offset the additional costs involved in processing their application. In the majority of cases the benefits of paying for a detailed assessment i.e. better insurance terms, less exclusions, lower premiums, and peace of mind, far outweigh the cost of the report.

What information do insurers need to be given?

Under the new Guidelines, insurers are required to “explain the basis for their decisions”. So for example when a policy cannot be offered because there is insufficient information to assess the risk, or exclusions have been added based on previous medical history, insurers need to explain why they’ve arrived at their decision and how they were limited by the information made available to them.

When considering the accuracy of medical advice or opinion it’s important to note that not all GPs will have the necessary skills to assess the risks on products such as life insurance. Ideally any medical advice or opinion should be provided by a doctor who has experience or training in the relevant area and is aware of advances in treatment. And in situations where the condition may potentially be subject to dispute, it’s best to seek the advice of a specialist e.g. for mental illness or back pain.

In terms of the guidelines, insurance underwriters are required to assess mental illness in the same way as physical disability, using reputable medical, psychiatric and actuarial advice as guidance. Again, any Exclusion is required to be reasonable, pertinent for that mental illness and will need to be justified in the same way as physical disabilities.

What if you think you’ve been treated less favourably or ‘knocked back’?

Insurers have always ‘deferred’ applications when they found there was too little data or medical advice to reasonably classify the risk, at that point in time. The Commission states that a deferral is not unlawful, but should not become a substitute for refusal – a practice that some insurers have been guilty of during the past decade. Any deferral should be for the minimum time necessary to quantify the risk.

Some of the reasons for insurers deferring cases include:

■ when medical tests need to be carried out and/or they are waiting for test results
■ when the applicant is on a temporary course of medication, the effects of which are unknown in the short term
■ in the case of cancer, where the deferral period can be as long as 5 years
■ in mental health cases where an accurate prognosis is not available

Whatever the reason for deferment, under the new guidelines, the process that’s to be followed and the criteria for resolution should be explained to the applicant - a practice that has been uncommon in the past.

Whilst the Human Rights Act does not permit insurers to ordinarily refuse insurance, this may be considered lawful where it can be justified actuarially that a premium rate cannot be calculated to balance with the risk.

Insurers can however offer policies on different terms and conditions. In fact with reinsurance companies being exempt from the Act, insurers will have to offer cover to individuals, even though they may be unable to obtain reinsurance. In such cases, the Sum Insured will be restricted to lower amounts.

If you feel you’ve been treated unfavourably when applying for insurance, we at Special Risk Insurance would be happy to review your case in light of the new guidelines. Please call us on 0800 774 757 or email expert@srisks.co.nz

Complaints process

Of course if all else fails, the Human Rights Commission offers a free, confidential and impartial process for handling complaints of unlawful discrimination. This process is kept as informal as possible – complaints don’t even have to be in writing (although if the issue is complex or long running a written report may be necessary). You do not require legal representation when making a complaint, and Commission representatives facilitate mediation meetings and provide parties with all the information and advice they need. The Human Rights Commission’s Infoline 0800 4 YOUR RIGHTS (0800 496 877) will accept enquiries or complaints by phone or you can email infoline@hrc.co.nz

Feedback

Any feedback, questions, or ideas for articles are welcome. Just drop us a line at - expert@srisks.co.nz.

And if you are having any problems in getting it approved, call the experts!

Regards

Brian and the team at SRI