The importance of medical history for insurance

Insurance quote forms are onerous. Several insurers insist on recording a detailed family medical history for health and life insurance. This question is often open-ended and the proposal form has limited space for an answer. The goal is to capture the current health status of your families. However, the prospective buyer is not sure what is expected: what level of detail is expected? How far back in time does one have to go? Most people after the age of 60 would develop some medical conditions. So do they have to share details of every illness? Buyers are uncertain about the impact of such disclosures on their offer. A number of agents would advise simply writing ‘good’ as the current status. Would this brevity affect their claims later?

The good news is that while insurers collect this information, it has little impact on signing the proposal and issuing the insurance. Family history, along with other information such as the industry in which the person is employed, does not make a significant difference to the offer. Rarely would an insurer apply a load on the premium or decline an offer due to an adverse medical history of the parents. This is true even for diseases with strong hereditary tendencies, such as diabetes and cardiovascular disease. Unless the individual shows early signs of developing these conditions, such as being pre-diabetic or having high cholesterol, insurers do not rate the offer any differently.

The purpose of collecting such information is more for profiling and consulting. When the policyholder fills in such information, it facilitates a more in-depth needs analysis. Individuals with an adverse medical history have an additional obligation to be fully covered. For example, people with a family history of cancer are strongly advised to purchase specific cancer coverage in addition to a standard health insurance plan. Similarly, it makes sense for people with a family history of coronary disease or paralysis to buy comprehensive critical illness cover. Considering the increasing incidence of such diseases, such plans are generally recommended for anyone to buy, especially for people with some medical history.

There is also a downside to not disclosing such information. During claims, the insurer may say there was a breach of full disclosure and deny the claim. It is common for doctors and hospitals to mention family medical history in prescriptions and discharge summaries. When reviewing such documents, underwriters typically compare them to the disclosures made in the proposal form. Failure to disclose is an immediate red flag and leads to claims disputes. As a good practice, any serious health problems suffered by the parents should be disclosed. This may include bypass graft surgery, chemotherapy, or a diabetic condition.

To ensure that such non-disclosure does not become a bone of contention for policyholders, the regulations also contain several safeguards. Both health and life insurance policies are subject to a non-contestability clause. Under this clause, after the specified period, insurers cannot challenge wrong or incomplete disclosures made by the policyholder, unless fraud is involved. The burden of proving this fraud is on the insurer. For health insurance it is eight years and for life insurance it is three years.

Globally, insurers are trying to create predictive insurance capabilities. Experiments are conducted to estimate the probabilities of certain diseases based on genetic analysis. When such models are fully developed, such information could prove to be very valuable in better advising policyholders and underwriting insurers. Although we are still a few steps away from such complexity, it is in the best interest of policyholders to fully disclose their family history to avoid any disputes during claims.

Abhishek Bondia is the Chief Officer and Managing Director of SecureNow.in.

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