By Janine Starks*
Dear Janine: I am struggling to get some basic life insurance. I have been overweight much of my life (about 100 kg these last few years) and I took anti-depressants more than 12 years ago for about 6 months. When I was expecting a baby I requested an HIV test for reassurance as my HIV-positive father had been living with us. I am not actually sure which of these ‘offenses’ I am being punished for the most, as the companies that declined my life insurance requests never gave any reasons. I am a 40-year-old non-smoking non-drinking female, and my life couldn’t be more conservative. I have recently had a gastric bypass, which should bring my weight into more normal territory. I wonder whether there is any point re-applying or will I still be red-flagged? Am I really eternally damned from getting some basic life insurance? I find it offensive that I am being treated like a leper. The only reason I persist, is that my child has a disability and I worry about the what-ifs in the future. Do you have any comments or recommendations?
Under-writers and under-takers
Obesity, depression, HIV risks and a gastric bypass; it makes for pretty hairy reading for those grey-suited po-faced insurance company under writers.
But when your situation is considered more carefully, the sensational headlines over-egg the real story. You had weight issues, which raise the risk of death, but you’ve taken that in hand with gastric bypass surgery. You have an HIV-positive family member - big deal, that’s a non-event. You had depression more than a decade ago, for a very short period. One in five New Zealanders are estimated to suffer depression at some point in their lives. So again, hardly worth the grey-suits shaking their pom-poms in shock at that one.
The smokers in our population are out there trying to kill themselves bold as brass, yet the insurance industry caters to them. They charge a higher premium for the higher risk. Underwriters are paid to guess how quickly we’ll all end up at the undertakers and they tend to charge more for our individual health risks, rather than decline applications.
So in principal, I tend to agree with you. This is rather odd and offensive.
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To get to the bottom of it, I called in some expertise from Fidelity Life, a New Zealand owned life and investment company. Reassuringly, they can’t understand why you’ve been declined insurance. It has left Fidelity and me wondering if there is something you haven’t told us? Or perhaps there is something in your medical records you don’t know about? The fact several insurers have declined cover, leaves me thinking we don’t have the full story here.
Looking at each issue:
1. The HIV test: Fidelity confirmed that sharing a house with an HIV positive parent is not likely to be taken into account (especially as we are presuming from your letter that the results were negative).
2. Depression: the key to this one may lie in what your medical records say. Do they note that you had suicidal thoughts or an actual suicide attempt? If so, this could have an impact, but insurers are able to put exclusions in place (so they won’t pay out in these circumstances). On the face of it, Fidelity agree that a single episode of depression, 12 years ago with six months medication and no suicidal thoughts or attempts, would not generally make a difference to an offer of life cover.
3. Obesity: this is the factor that is likely to have had the most impact on your ability to get cover. Fidelity point out that if there is also a history of genetic cardio-vascular issues or other associated health issues, this would be adding to the problem.
4. Gastric Bypass Surgery: my own research tells me that this type of surgery divides the stomach and is used to treat morbid obesity, or those with a Body Mass Index of 40 or more (your weight divided by your height squared). Around 0.5% of people die within six months of the surgery and 15% suffer complications. That tells me insurers will be wary, but on the other hand, once you’ve come through it (as you have) your prospects are much better. Long-term death rates are shown to reduce by 40% with this procedure. Fidelity confirmed they don’t offer life cover until six months after gastric bypass surgery. Once the six months is up and no other health issues have arisen, they would consider an offer. You should expect the premiums to be higher than normal and to be reviewable, because of the risks of complications or a relapse and weight gain in the years that follow.
Getting your medical history
When you disclose all your health conditions on a life insurance application form, the insurer is generally obliged to explain which conditions caused you to be declined. However, if they saw issues in your doctor’s notes they would normally write to your doctor, so they could discuss it with you. Asking your GP for a full copy of your notes could unravel the mystery. You are entitled to these and they might shed more light on the issues that the insurers have seen.
What are the costs?
Out of interest, I asked Fidelity to supply some prices for a generic 40-year-old non-smoking female who wanted $300,000 of life insurance. Then I guessed her height and weight and added some health issues. In the first instance, with no health problems the price was estimated at $21 a month. If that same woman had depression 12 years ago and it hadn’t resumed, there would be no change to the price. If she weighed 100 kg and was 5 feet 6 inches tall (Body Mass Index of 36) and no other health issues, the cost is estimated at $26 a month. However, Fidelity note that a BMI of 36 is borderline and any increase to this would result in a higher premium.
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*Janine Starks is Co-Managing Director of Liontamer Investments. Opinions in this column represent her personal views and are not made on behalf of Liontamer. These opinions are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product. Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.