Underwriting

We’ll try and make our financial underwriting decisions immediately. To do this we’ll get as much information as we can through our online financial questions, including details of any existing cover and the specific reason for the new cover. This means that the majority of your cases will be processed straight through without the need for further evidence or a paper financial questionnaire.

Financial underwriting limits

*We'll need a financial questionnaire completed if you submit a paper application for your client.

See our financial frequently asked questions

How to calculate the sum assured

Personal cover rules

The maximum Life Cover we’ll allow is based on a specific multiple of your client's salary and the number of years to their retirement, with Critical Illness Cover based on half this calculation. We use age 70 as the normal retirement age.

Amount of cover = (70 - your client’s current age) x current salary. 

For example if your client is 35 and earns £50,000 a year:

• for Life Cover: 70 - 35 = 35 x £50,000 = £1.75m
• for Critical Illness Cover: £1.75 / 2 = £875,000.

Mortgage protection

Life Cover and Life with Critical Illness Cover for mortgage purposes will be assessed directly against the mortgage amount. We won’t restrict the term of the cover to the term of the mortgage.

Inheritance protection

Life Cover for Inheritance Tax (IHT) should reflect the IHT liability of the person covered directly.

Please see www.hmrc.gov.uk/inheritancetax for the latest information on tax rates and allowances.

Business cover rules

Business loan

Life Cover and Life with Critical Illness Cover for business loans should be appropriate to the specific amount of the loan and the term. Consideration is also given to the number of people being covered. Where you’re applying for cover for multiple people within a business you should consider offering each person covered the appropriate split of the full loan amount.

Key Person

Life Cover and Life with Critical Illness Cover for Key Person allows you to choose whether the sum assured should be based on multiples of the key person's income or loss of profits.

• Up to a maximum of 10 x total income.
• Maximum allowance of up to 5 x net profit (averaged over last 2-3 years). This figure then needs to be split according to the percentage of profit attributable to the key person.

For example: net profit average = £600,000 x 5 = £3m. Key person drives 50% of the business profits; therefore the sum assured will be £1.5m.

Shareholder/Partnership protection

Life Cover and Life with Critical Illness Cover will be calculated on a business valuation based on the net profit and assets and then an appropriate allowance will be assessed based on the client’s share percentage.

• Up to a maximum of 7 x net profit (averaged over 2-3 years) plus net assets x percentage of shareholding.

For example: net profit average = £800,000 x7 = £5.6m. If four shareholders hold 25% shareholding each, then the sum assured will be £1.4m per life assured (£5.6m / 4 = £1.4m).

Relevant life cover rules

The maximum for Relevant Life Cover will be based on multiples of the total remuneration of the life assured.

• Under 45 = Total remuneration x 30.
• 45-65 = (75 less your client’s current age) x current remuneration.

For example: if your client is 50 and earns £50,000 a year, this would be 75 - 50 = 25 x £50,000 = £1.25m Life Cover.

• Over 65 = Total remuneration x 10.

Sometimes we are unable to offer full Critical Illness Cover so it may be necessary to exclude core conditions or specific impairments.

Premium reduction exclusions

There are 4 exclusions that would result in a reduction in the premium:

• cancer
• multiple sclerosis
• breast cancer
• breast and ovarian cancer.

The premium reductions reflect the incidence of claim for that condition. Cancer is the most common reason for claiming under a critical illness policy and accounted for 65%* of all Critical Illness claims in 2016.

The actual reduction in premium will vary depending on the individual applicant.

An example would be: a female, non-smoker applying for Critical Illness Cover would receive a 30% premium discount if cancer is excluded as a core critical illness condition.

Non premium reduction exclusions

There are various exclusions that will not result in a reduction in premium and a few examples have been listed below:

• blindness
• deafness
• occupation.

The reason that a reduction is not given for these types of exclusions is due to the very low incidence of claims associated with these.

*Source: Scottish Widows, based on the number of critical illness claims paid out by Scottish Widows between January 2016 and December 2016.

We have two definitions of disability which apply to Total Permanent Disability and Premium Protection.

We want to offer an ‘Own Occupation’ definition to your clients in as many cases as possible.

To allow us to do this, certain types of occupation will have a small loading applied to Total Permanent Disability (TPD) only. This won’t be reflected in your initial quote and will only be advised once underwriting has been completed. This will not apply to the Premium Protection benefit.

Where we can’t offer Own Occupation, we’ll consider offering Activities of Daily Work (ADW). The definition of ADW means loss of the physical ability through illness or injury to perform at least 3 of the 6 work tasks listed in the key notes section below.

If your client has a high risk occupation we would exclude TPD from the core critical illness conditions and decline the premium protection benefit.

The table below highlights the different occupation risk categories and the definition of disability that would apply:

To check your client's occupation to see if TPD and Premium Protection are available and the definition that would apply, use our definition of disability indicator tool

Key notes

• All portal and extranet quotes will assume Own Occupation to produce the quote.
• The definition that is applied will be confirmed in the policy schedule.
• If TPD is on an Own Occupation basis then the maximum amount payable on claim is £1,500,000 for personal cover, £2,000,000 for business cover and £2,500,000 if your client has a combination of both types of cover. This maximum will apply across all policies held in the market place regardless of the overall sum assured.
• TPD acceptance will also be subject to underwriting using medical disclosures which could also change the definition applied.

Own Occupation definition

• Own Occupation means the loss of the physical or mental ability, through an illness or injury, to the extent that your client is unable to do the material and substantial duties of their Own Occupation ever again.
• The material and substantial duties are those that are normally required for, and/or form a significant and integral part of, the performance of their Own Occupation that cannot reasonably be omitted or modified.
• Own Occupation means the trade, profession or type of work your client does for profit or pay. It is not a specific job with any particular employer and is irrespective of location and availability.
• The relevant specialists must reasonably expect that the disability will last throughout your client’s life with no prospect of improvement, irrespective of when the cover ends or the insured person expects to retire.
• For the above definition, disabilities for which the relevant specialists cannot give a clear prognosis are not covered.

Activities of Daily Work definition

• Walking – the ability to walk more than 200 metres on a level surface.
• Climbing – the ability to climb up a flight of 12 stairs and down again, using the handrail if needed.
• Lifting – the ability to pick up an object weighing 2kg at table height and hold for 60 seconds before replacing the object on the table.
• Bending – the ability to bend or kneel to touch the floor and straighten up again.
• Getting in and out of a car – the ability to get into a standard saloon car, and out again including being able to unlock and operate the door latches.
• Writing – the manual dexterity to write legibly using a pen or pencil, or type using a desktop personal computer keyboard.

The relevant specialists must reasonably expect that the disability will last throughout your client’s life with no prospect of improvement, irrespective of when the cover ends or the person covered expects to retire. The person covered must need the help or supervision of another person and be unable to perform the task on their own, even with the use of special equipment routinely available to help and having taken any appropriate prescribed medication.

For the above definition, disabilities for which the relevant specialists cannot give a clear prognosis are not covered.

Your client's occupation plays an important role in our assessment of their application. Our underwriters look at a variety of factors which can have an impact on the terms we offer such as:

Health risks:

• musculoskeletal conditions like back pain or upper limb disorders as a result of physically demanding work, repetitive actions and poor posture
• work-related stress causing anxiety and physical symptoms
• respiratory disorders.

Accidental risk:

• over half of employee fatalities are a result of being struck by a vehicle or object, or falling from heights
• handling or slips, trips and falls
• fire, explosion or electrical accidents.

Depending on your client's job title we may ask if their occupation involves the following:

• any manual or physical duties
• regular work at heights outside of over 15 metres
• working in the Merchant Navy
• flying, other than as a fare paying passenger
• diving
• working offshore in the fishing industry or oil and gas industry.

Your client's occupation will decide the definition of disability which applies to any Total Permanent Disability or Premium Protection cover included within the plan but this may change following medical underwriting.

To check your client's occupation to see if TPD and PP are available and the definition that would apply, use our definition of disability indicator tool

Residency and travel are important risk factors which may influence our acceptance terms.

Residency

Our general rules for residency

• For personal protection policies, the life assured and policy owner must both be habitually resident in the UK (excluding the Channel Islands and the Isle of Man) and have a UK bank account.
• We may consider Life Cover only if the life assured is on a short term working contract abroad for up to 2 years.  Your client needs to maintain a UK bank account and address.  They need to have intentions to return to the UK when the contract finishes. The country of residence will also need to be assessed.*
• For business protection the employer and/or firm (policy owner) must be legally set up in the United Kingdom (excluding the Channel Islands and the Isle of Man) with a UK bank account. The life assured may be based overseas. The country of residence will need to be assessed along with the ability to obtain any necessary medical evidence.*

*Please contact our underwriters to discuss these types of applications before you submit the application.

For past travel

We’ll base our risk assessment on identifying considerable past travel to countries that have a high prevalence of HIV and Hepatitis. Any past travel to Africa, Thailand or the Caribbean for more than three months in the last five years will be referred to our underwriters for individual assessment. We’ll need to know which countries have been visited, which in turn may result in an HIV and/or a hepatitis test. Where a test is required, we can't offer terms before this.

For future travel

We’ll base our risk assessment on identifying any future travel to countries that are deemed high risk. High risk is determined by general political, social and economic infrastructure, together with the specific risks presented by crime, kidnapping, terrorism, accident and the quality and availability of medical services. Most cases will need to be assessed on an individual basis.

Summary

• All holidays for less than 30 days do not need to be disclosed.
• Temporary travel to European Union, USA, Canada, Australia and New Zealand can be ignored.
• Travel for more than 6 months a year will mean Critical Illness Cover/Total Permanent Disability/Premium Protection is declined.
• We can consider short-term working contracts up to 2 years for Life Cover only. Your client needs to maintain a UK bank account and address. They need to have intentions to return to the UK when the contract finishes. The country of travel will also need to be assessed.
• For the purposes of mortgage cover only, Armed Forces travel is acceptable, unless they are under orders in the next 12 months.

We’ll apply an additional premium for Life Cover for any of your clients who answer ‘yes’ to the following:

• have you been banned from driving or convicted of careless driving in the last 5 years?
• have you ridden a motorcycle or scooter on the road in the last 12 months?

The additional premium reflects the increased accident risk as:

• around 14% of all deaths in reported road traffic accidents in 2013 involved at least one driver over the drink driver limit*
• in 2014, motorcycles represented approximately 1% of total road traffic but account for approximately 19% of all road deaths*.

Further information can be found on the Department for Transport website (PDF)*

For your clients who work in the Armed Forces, which includes the Territorial Army (TA) and Reservists, these are the details of our current position:

Full time personnel

• We’ll only accept business that is specifically for mortgage cover.
• We can’t accept any business if the person applying is currently serving in, or under orders to go to a theatre of operations within 12 months.
• The maximum sum assured available is £250,000 for Life Cover, Critical Illness Cover and Life with Critical Illness Cover.
• The Armed Forces exclusion* will always be applied to Critical Illness Cover.
• Any hazardous activities e.g. diving, special services, will require individual assessment by our underwriting team.
• The definition of Total Permanent Disability (TPD) will always be Activities of Daily Work (ADW) for full time service personnel.
• Premium protection will not be available.

TA/Reservists

• We are able to consider all types of business from customers in the TA or who are Reservists as long as they are not under orders.
• We can’t accept any business if the person applying is currently serving in, or under orders to go to a theatre of operations within 12 months.
• The Armed Forces exclusion* will always be applied to Critical Illness Cover.
• Any hazardous activities e.g. diving, special services, will require individual assessment by our underwriting team.
• The definition of TPD for TA and Reservists will be relevant to the main occupation.
• Premium protection will not be available.
• Any special duties will also need to be individually assessed.

*There won’t be any payment made under Critical Illness Cover for any claim arising as a result of any event occurring while the person covered is undertaking duties on behalf of, or during service with, the British Armed Forces or any other militia in an active theatre of operations or conflict. This exclusion applies for the length of the cover.

There are some conditions that we’ll apply a sum assured restriction to if your client has suffered from them.

These are:

• invasive cancer
• cardiomyopathy
• diabetes - All type 1 and some type 2 diabetes
• emphysema
• chronic heart disease
• chronic kidney disease
• stroke.

We’ve chosen these conditions due to their high decline rates. When these medical conditions are disclosed, our automated underwriting system will only continue with questioning where the sum assured for Life Cover or Critical Illness Cover is £250,000 or over.