What is underwriting in life insurance?
Underwriting is the process insurers use to assess the level of risk associated with providing insurance cover.
When someone applies for life insurance, the insurer reviews certain information to understand factors that may influence the likelihood of a future claim. Based on this assessment, the insurer then determines whether cover can be offered and under what terms.
The information requested during underwriting can vary depending on the insurer and the type of policy.
Common factors considered during underwriting may include:
- age
- occupation
- medical history
- smoking status
- lifestyle or recreational activities
Some life insurance applications involve answering only a small number of questions, while others may require more detailed information depending on the underwriting process used.
What is fully underwritten life insurance?
Some life insurers use full underwriting, which involves a detailed assessment of an applicant’s medical history, health and lifestyle before cover is offered.
A fully underwritten application may involve:
- completing a detailed health and lifestyle questionnaire
- providing information about past medical conditions or treatments
- requests for reports from a doctor or other healthcare professionals
- medical examinations such as blood tests or health assessments
Because additional information may need to be gathered and reviewed, the application process for fully underwritten policies can sometimes take several weeks or longer depending on the complexity of the assessment.
This approach allows insurers to build a detailed understanding of an applicant’s health and lifestyle when determining whether to provide cover, and if so, the terms of the cover.
What is a limited underwritten life insurance?
Some insurers offer policies that use limited underwriting, which typically involves a shorter and more streamlined application process.
With limited underwritten policies, applicants usually answer a smaller set of health and lifestyle questions during the application process. In many cases, medical examinations are not required.
Because fewer steps may be involved, applications can sometimes be processed faster than with fully underwritten policies.
How the Medibank Life Insurance underwriting process works
The application process for Medibank Life Insurance is designed to make applying for cover more straightforward.
The application process typically involves:
- answering a short series of health and lifestyle questions
- completing the application online or over the phone
- providing personal and medical information
At Medibank, medical examinations or blood tests are not required as part of the application process.
Because the assessment relies on a simplified set of questions rather than extensive medical testing, decisions can often be made on the spot.
For people balancing work, family and other commitments, a shorter application process may make it easier to explore life insurance options.
Comparing different underwriting approaches
Different underwriting approaches involve different levels of assessment during the application process.
Fully underwritten life insurance
- involves a detailed review of health and lifestyle information
- may require medical reports or health tests
- applications may take longer if additional information is required
Limited underwritten life insurance
- uses a shorter set of application questions
- often does not require medical examinations
- may allow applications to be processed more quickly
Imagine two people applying for life insurance. One is happy to complete a more detailed application process and wait for a decision, while another may prefer a simpler application process, with fewer questions and less paperwork. Depending on the application and eligibility requirements, this may result in a faster decision.
Why do application times vary?
Decision times for life insurance can vary depending on the level of assessment required during underwriting.
Fully underwritten applications may take longer because additional information may need to be collected and reviewed, such as:
- medical reports from doctors
- results from health examinations
- responses to detailed questionnaires
- blood tests requirements
If this information needs to be requested from third parties, it can add time to the application process.
Applications that involve fewer questions or require less additional information can be assessed more quickly.
Things to consider when applying for life insurance
When exploring life insurance options, some people look at how the application process works and what level of information may be required.
Factors people sometimes consider include:
- how many questions are asked during the application
- whether medical tests may be required
- how long it may take to receive a decision
- how much information is needed during the assessment
- when cover may commence, if the application is accepted
Understanding how underwriting works can help explain the differences between life insurance policies and what the application process may involve.
Ready to get or talk about life insurance? Have a look at the Medibank Life Insurance PDS. You can also get a quick quote online or call the Medibank team on 1300 152 271 if you’d like to talk to us.
Things you should know
Medibank Life Insurance and Medibank Income Protection (collectively Medibank life insurance) are issued by the insurer, Zurich Australia Limited ABN 92 000 010 195 AFSL 232510 (Zurich). NEOS Direct, a registered business name of NDLI Pty Ltd ABN 70 665 747 277 AFSL 547119, distributes and services Medibank life insurance, which is promoted by NEOS Direct's authorised representative Medibank Private Limited ABN 47 080 890 259 (AR No. 286089) (Medibank).
Any advice provided is general only and doesn’t consider your objectives, financial situation or needs. You should consider these factors, the appropriateness of the advice, and carefully read the relevant Product Disclosure Statement (which sets out the product terms, conditions and exclusions), Target Market Determination and Financial Services Guide before making a decision to acquire, or continue to hold, the product.
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