Royal London Underwrite Later (Protection Review rating: Platinum, Adviser score 8.4)

February 2021 Royal London: Other


Royal London’s new Underwrite Later option allows business protection cases to start straight away, while the insurer then goes about deciding what medical information it needs, gets it and then underwrites fully. The option is available on the insurer’s Business Menu and Relevant Life Plans but only applies to life cover.

The insurer estimates it can almost double the number of business applications that can start immediately, from 49% to 93%. For comparison, the figure for personal protection application is that around 80% go straight through. Moreover, there are no automatic exclusions such as pre-existing conditions, travel and hazardous pursuits, unlike some other immediate cover options in the market.

At a time when getting customers medically examined quickly and safely can be troublesome, the option takes away the pressure to rush things, as six months is allowed to obtain all the medical information necessary. If it cannot be obtained by then, the policy will be cancelled. The insurer estimates only 3% of applications will fail the six months test and that no alterations will be needed for 80% of applications.

The initial underwriting stage could still see a rating applied. For example, someone aged 50 might have a BMI of 38, in which case a 50% premium rating might be applied. Even if it took three months for the customer to have a medical examination, if the evidence backed up what the application form revealed, no further changes would be needed. In the meantime, if say the policy was needed to secure a business loan, that loan could go ahead, and the customer’s policy could be in force from as soon as the initial underwriting decision was made.

Royal London has produced a helpful downloadable sales aid which sets out how the option works in practice. Up to £3.5m of cover is available under the option.

Advisers can choose to start the plan on a non-indemnity commission basis to reduce the risk of a clawback in the event the final underwriting decision means a reduced premium or cancellation. Once underwriting is completed, the adviser can then switch commission back to an indemnity basis and receive the rest of their initial commission as a lump sum.

Comment: Protection insurance is one of the few products where there can be a significant change in the cost of the product from the time the customer ‘places their order’ to the time the product (in the form of acceptance) is actually delivered. More so, as any differences are almost always due to the customer’s health or activities.

That time gap during the COVID-19 crisis has been considerable at times and so often means no cover is in force. As the whole point of having insurance is to get that cover, it is not just frustrating but also embarrassing and in extremis could even jeopardise a business and its leaders if it can’t get the cover it needs quickly to support a business activity such as a loan.

Royal London’s Underwrite Later is not a complete solution for everyone, but may be for the vast majority of business clients and their advisers.

Importantly, cover is full from the outset and it’s only if the medical evidence shows up an unforeseen problem that things might fall apart. Even then, the most likely result will be a higher premium, lower sum insured or exclusion. Even the commission terms can be tweaked to help the adviser, within prudent limits.

In a perfect world, Underwrite Later would also apply to CI and IP cover and to personal cover as well as business. However, we’re not there yet – even if the concept does allow scope for it to be extended once it has been proven in practice. Mortgage applications might perhaps be the logical next step. Meantime, the theory is good and it’s a valuable additional tool for advisers and for their clients. It might even help see more business protection cover being written.

Plus points: No cost option for business protection cases; Full cover from time of initial underwriting decision; Less risk of lapsed applications; Massive potential to speed up acceptance on many cases; Covers all but the very largest sums insured; Six months to obtain medical evidence should be generous; Adverse findings are likely just to lead to a rating; Commission terms can be tweaked to get best cashflow/risk.

Not so plus points: Only applies to life cover; Not available on personal business; Some policies could end up being rated or cancelled by the insurer.


Rating (max 10): Overall: 9. Platinum

Tags: Other/Royal London

I Mark: Yes

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