INSURANCE By Steve Wright
KEEP AN EYE ON SPECIFIC EXCLUSIONS Is health insurance general exclusions a trap for the unsuspecting? Steve Wright tells us more.
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xclusions are the evil twin of benefits. Exclusions are instances when, despite the benefits provided, no claim is payable. Understanding any exclusions present in a policy is as important as understanding the benefits. There are two broad types, general exclusions and life assured specific exclusions (specific exclusions): ➜ General exclusions are provided for in the policy and they apply automatically to every life assured under that policy. No special terms are issued in respect of general exclusions because they are already catered for in the policy wordings. General Exclusions apply forever, even if the condition arises after policy issue. ➜ Specific exclusions only apply to that specific life assured and are agreed to by the life assured (by the acceptance of special terms issued by the insurer) as part of their application for cover. Specific exclusions are not provided for in the policy wordings they arise out of and are usually determined as a result of the underwriting process. Specific exclusions do not apply unless the condition is present at the time of policy issue. While specific exclusions do usually get the attention they deserve from advisers, general exclusions typically do not. Appropriate general
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exclusions will always be necessary to the longterm sustainability of insurance, but advisers cannot simply ignore them. This is particularly true of health insurance, where exclusions are many and often vary between providers. Health Insurance comes with a long list of general exclusions, many of which are typically common across the range of providers in New Zealand, for example, acute medical treatment; experimental treatment, treatment for mental illness and HIV/Aids, and treatments which are not medically necessary.
Informing clients There is not much advisers can do about general exclusions that are common to all providers and accordingly, aside from informing the clients about them, there are few compliance or advice concerns. However, significant general exclusions are also imposed by some providers – but not others – and these create a potential compliance danger and advice issues for advisers, because alternatives do exist. In some cases, general exclusions may actually impose important obligations on advisers. Unfortunately, neither of the three product rating services deal with exclusions in a particularly helpful way or even at all (which is surprising considering how very important
exclusions are) so advisers really should take care to understand the exclusions in the various health providers’ policies. The very medical condition of concern to your client may, in fact, not be covered. General exclusions to watch out for: Advisers should be particularly aware of general exclusions that are not universally applied by all providers, for two main reasons. The first is because, in the absence of terms removing them, general exclusions will automatically apply to all clients and the second is because alternative providers, which do not include a general exclusion, may well be a better option for the client.
Life assured It is worth remembering that providers which do not have a particular general exclusion, can still apply a specific exclusion, but this only applies to the specific life assured, will not apply to future health conditions arising (locks good health in), and is only imposed if the client agrees (usually during application or once special terms are issued). A few examples of general exclusions that are not universally applied follows, but this isn’t an exhaustive list: ✚ Allergies: It seems to me that severe allergies are becoming more and more common, particularly in children, so this exclusion will be of
