Why these advisers avoid medical underwriting

Could advisers find themselves in non-disclosure disputes with insurers if they help clients with their annuity paperwork?

Medical underwriting for annuities is set to become ever more complicated and important as retirees search for better rates based on their health.

However, some IFAs are attempting to shift the responsibility for the paperwork to their clients to avoid liability for non-disclosure.

The risks

Peter Chadborn, principal of Plan Money, said he stopped helping clients with protection questionnaires four years ago and is considering a similar move with annuities.

He said it is dangerous for IFAs to help clients with the forms because “the IFA then becomes involved in the decision about what needs to be disclosed”.

“If a policy does not pay out because of non-disclosure, the IFA is at risk because a client can say they disclosed a medical condition to their adviser who then failed to fill out the form properly,” said Chadborn.

“The Financial Ombudsman Service (FOS) could also question whether an IFA provided the right environment for a client to fully disclose their medical history.”

Client outcomes

Allowing clients to fill out medical questionnaires separately and at their own pace can actually lead to better outcomes for them, particularly with enhanced annuities, Chadborn said.

“Clients cannot always remember all of their medical history on the spot, and some might not be comfortable discussing such personal information with their adviser,” he said.

Letting go of tradition

Chadborn said some IFAs resist letting go of their traditional role in helping the client fill out their applications, as the time spent doing this can be charged for.

Additionally, many advisers feel if they do not guide their clients through the process, clients will take questionnaires away with them, forget to fill them out and never get around to buying the policy.