As an example, a 45-year-old man with a height of 170cm and a weight of 113kg, giving a BMI of 39.1, applies for £250,000 of level life insurance over a 20-year term. His monthly premium at outset is £52.80.
He is given the option to reduce his premium by four per cent each year if he is able to reduce his weight to below 107.3kg. Alternatively, if his weight increases to 122kg, or he does not provide an annual weight result, his premium will go up by 5.25 per cent. In addition, his monthly premium will be locked in for the remainder of the policy term if it drops to £43.05 or increases to £68.19.
Warm reception
Both products have been well received by advisers. Rob Harvey, independent protection expert at specialist advisers Drewberry, says he is seeing more clients with type 2 diabetes and/or a high BMI.
“These individuals are having to pay a significant loading on their premium to get cover and in some cases this is a higher loading than for those who smoke or drink excessively,” he says.
“There is a higher morbidity risk for those with diabetes but, when the condition is well-managed, you have to wonder whether it is truly higher than for those who drink or smoke a lot.”
He also applauds these products for encouraging people to lead healthier lives. “If someone ends up leading a healthier life and saving money as a result, they win on both counts,” he adds.
Nudging policyholders to make improvements to their health is nothing new though, with this approach pioneered by Vitality across its medical insurance and protection range. For example, by using its Wellness Optimiser, policyholders with type 2 diabetes can see their life insurance premiums reduce by up to 40 per cent if they can demonstrate they are controlling their condition at an annual health check.
The approach that many insurers take towards policyholders who give up smoking is another variation on this. In this case, if someone has been nicotine-free for 12 months, while some insurers will insist they are underwritten again to benefit from lower premiums, others will switch them on to non-smoker rates without quibble.
Broader cover
Although it is positive that insurers are beginning to cater for some groups that would previously have struggled to obtain cover, there are still plenty of people who do not fit the health criteria demanded by the insurers. For these individuals, Mr Knowles recommends speaking directly to insurers first.
“Quotation systems will often decline anyone with any health or lifestyle issues, but if you can get the ear of an underwriter you are much more likely to get them to agree cover,” he says.
