Underwriting, disclosure and policy administration
This domain covers how cover is underwritten, what the client must disclose, and what has to be managed after the policy is issued.
The underwriting process
Application, personal statement, medical and financial underwriting (GP reports, pathology, financial evidence for large sums), then a decision: standard terms, loading, exclusion, postponement or decline. Financial underwriting checks that the sum insured is justified by the client's circumstances.
Disclosure and materiality
NZ law modifies the common-law duty: an insurer generally cannot avoid a policy for non-disclosure unless the matter was material to its decision. In practice, the application questions define what must be answered honestly, and the first three years form the contestability period in which claims are closely investigated.
Administration
- Issue and endorsements; changes of occupation, address and sum insured.
- Assignment and beneficiary nomination.
- Premium payment, grace periods, lapse and reinstatement.
- Privacy Act 2020 and the Health Information Privacy Code 2020 for medical records.
Worked example
A client omits sleep apnoea and a CPAP prescription. The insurer issues standard terms. On a later cardiac claim it obtains GP records showing the condition was known at application. Within contestability it may avoid the policy if the omission was material; the adviser's notes should show the client was asked and answered the question themselves.
Traps
Completing or paraphrasing the client's medical answers for them; signing a declaration on the client's behalf; assuming an issued policy cannot be challenged; and forgetting to notify a change of occupation that alters the risk class.