AFM statement on Protection Insurance and Coronavirus, July 2020

AFM statement on protection insurance and coronavirus, July 2020

Member organisations of the Association of Financial Mutuals assess each application for income protection on an individual basis, focussed on the applicant’s health, medical history and the severity of any symptoms at the time.  In reviewing an application, a mutual will ensure it complies with the Equality Act, to ensure the outcome of an underwriting decision is fair and appropriate.

Amongst AFM members, in 2019 more than 95% of claims received were paid.  For a mutual, underwriting is the first stage in the claims process: in other words, by taking care in the underwriting process to take full account of the medical history and circumstances of the individual at application stage, the policyholder can reasonably expect that a valid claim in the future will be paid, assuming the usual policy conditions are met.

Underwriting is a source of competition between insurers, and each develops its own underwriting philosophy based on its risk appetite.  As a result, in the early stages of the pandemic, many mutual insurers responded cautiously to the unknown consequences of Covid-19.  Exclusions were introduced, consistent with the Equality Act, to protect the existing membership.  As the worst effects of Covid-19 begin to fall away, mutuals are beginning to carefully explore how they can relax some of their exclusions and policy changes.

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