What is the Explaining Underwriting Decisions Agreement?

The Explaining Underwriting Decisions Agreement is an agreement that has been signed up to by 19 insurers so far as part of the Access to Insurance Underwriting Workstream.  The objective is to offer clear explanations of the underwriting process and decisions made on whether to insure people or not and if there have been any premiums increase loadings or terms applied when applying for life insurance, critical illness insurance and income protection plans.

This will mean that as part of Treating Customers Fairly (TCF) insurers will explain to you how they reached a decision on whether to insure you or any premium loadings or terms applied or indeed cover was rejected or deferred.

Many people ask why you get different terms and different premiums for similar types of cover with different insurers.  This is because each insurer will have its own claims experience, its own spread already of insured clients of certain age bands or illnesses or levels of cover.  For example, if Insurance Company A has 100,000 clients already insured in the 50-60yrs age band and Insurance Company B has just 20,000 in that age band but 60,000 clients in 40-50yrs age band, company B is more likely to offer competitive terms for 50-60yr olds whereas company A may load premiums across the board for that age band to reduce the number of applications and exposure and offer better terms for the 40-50yrs age band..

The same can be said for any area of underwriting.  If an insurance company’s ‘book’ is weighted towards smokers, they may wish to price contracts to attract non-smokers or if they already insure too many 20-30yrs drivers, they may pull away.

Insurance underwriting is a little like going to the ‘bookmakers’ to bet on a race.  Insurers are constantly balancing their books to ensure they have an equal spread of risk across ages, occupations, levels of cover, health conditions and geographically.

The Explaining Underwriting Decisions Agreement will mean insurers will supply you with information on how they reached a decision on your insurance cover as well as signposting you to other insurers if they do not offer cover and/or believe you may secure cover with Insurance company C, D or E.

This agreement comes into force in December 2021