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How are your life insurance premiums calculated

How are Life Insurance premiums calculated?

Author: Daniel Sharpe-Szunko

It’s important to understand how your life insurance premiums are calculated so you know what you’re paying for. Life cover is mainly designed to protect your family, home and business if anything happens to you.

Ultimately if you were no longer around to support your family or your income was impacted because of an illness or accident, these policies would relieve the financial burden. Life insurance, critical illness cover and income protection all come under the same umbrella of personal protection products.

Life insurance is the main type of cover because it’s the most common and the most affordable. This is simply because you’re much less likely to have to claim on a life insurance policy than critical illness cover or income protection.

A life policy is a contract between you (a policy holder) and an insurer. The policy becomes valid when premiums are collected (monthly or annually) after ‘acceptance terms’ are issued.

The policy is set to cover an amount (sum assured) over a period of time (term) to pay out to on death, serious illness or accident (depending on cover type).

What is life insurance?

A life insurance policy is simply a policy that pays out to a beneficiary (e.g. wife, children, partner or family) in the event of death. This pay-out is usually a tax free lump sum which can form part of your estate or this can be avoided using a Trust.

Life insurance also comes in 4 main forms which are all designed for different purposes depending on what you want to cover:

  • Level term (family protection) which is simply to protect your loved ones in the event of death
  • Decreasing term (mortgage protection) which is specifically designed to cover a mortgage (repayment mortgages only)
  • Whole of life is a more recent addition to the life insurance market which is a non-investment based guaranteed life cover
  • Family income benefit is also a newer type of cover which is specifically for your family and provides an annual income rather than a lump sum

All of these different types of life cover also cost different amounts per thousand pounds because of how they pay out. Whole of life is always the highest because it is guaranteed to pay out (as long as you continue to pay your premiums). Family income benefit is the cheapest because the amount of cover reduces faster than the other types of cover.

How are basic life insurance premiums calculated?

A life insurance premium is made up of several main factors before health and lifestyle are taken in to account. These are the things that would be taken in to account to give a base premium, which includes:

  • Age (Note: every time you pass a birthday your premiums will increase)
  • Smoker status (Note: No nicotine or nicotine replacement products for at least 12 months to be classed as a non-smoker)
  • Sum assured (amount of cover)
  • Term (length of policy in years or to age)
  • Type of cover (e.g. level term, decreasing term, family income benefit or whole of life)

Note: Gender– In February 2012 the EU Gender Directive made it illegal to use gender to differentiate between individuals for insurance

What else is used to calculate a life insurance premium?

There are also several other elements that are used to calculate the premium that a person (policyholder) will pay for cover. The following elements are behind the scenes calculations which will also be different for each insurance provider.

Underwriting process

When an application is submitted to an insurer, it will enter one of several potential routes depending on the disclosures. Generally the more complex the disclosures (e.g. medical conditions, hazardous occupations and dangerous activities) the more work that will be required at the back end.

The various types of underwriting processes are:

Underwriting Rules Engine (URE’s) which is where modern technology is used to apply a premium based on disclosures on an online application. Usually an insurer will allow a system (URE) to make a decision up to a set threshold (level of risk)

Manual underwriting is simply where an application will be referred to an underwriter (a person who assesses risk) to calculate a premium. An underwriter will also have certain limits that they will be allowed to go to before the next stage

Nurse screening or telephone medical will be used to gather additional medical evidence via a professional (e.g. nurse). These tests will usually include BMI (height & weight), blood sugar levels, cotinine test (smoker test), and blood pressure

Full GP report (medical report) which will be obtained directly from your GP or Doctor to provide a full breakdown of your medical history. Medical reports are usually for more complicated medical conditions or where symptoms are more severe

Once the underwriting process has been completed by whichever process, a premium will be offered based on information provided. Each insurer has a different set of parameters for each persons circumstances based on their ‘underwriting philosophy’.

Mortality and Morbidity data

All life insurance offices will have a team of actuaries who are mathematical people that calculate risk. These people will constantly be looking at trends in data which help them to make decisions for certain groups or risk categories.

Some of the most common types of morbidity are heart disease, cancer, chronic lower respiratory diseases, stroke, diabetes, pneumonia and influenza, Alzheimer’s disease, kidney disease and suicide.

Also co-morbidity is where two conditions occur simultaneously in the same person. The conditions don’t need to be directly linked to a cause, however they may often occur together. Some examples of co-morbidity are depression, diabetes and obesity which often occur together but are not likely to have the same cause.

There is no exact science to how an insurer will calculate a premium for an individual, however the insurer will use this information to calculate risk of death. It is a fair assumption for example that ‘a person in their 50’s is more likely to fall ill or have an existing medical condition to a younger person.’

Costs and margins

Any business will need to make sure that it is profitable and insurance is no different. There is a cost associated to running an insurance company and for processing an application. Each insurer will have their own costs and these will be different depending on the size of provider and how they operate.

There are several main costs that will be taken in to account when processing an application for life insurance. Some of the main costs will include:

Underwriting – a team of underwriters is a cost to a business so that must be taken in to account

Medical evidence – medical reports from a GP or doctor will costs anywhere between £60 and several hundred pounds

NTU rates (not taken up) – every time an application is processed that is either declined or not accepted, there will be a cost associated to that

Lapse rates (cancelled cases) – if a policy is cancelled within a certain period of time then it may then incur cost to the insurer

Generally bigger insurance providers are more efficient than smaller or newer insurance providers so can therefore drive lower premiums. Profit margins for life offices are difficult to project as they are forecasts based on future premium collections and potential claims.

For more information about this subject you can contact one of our team of experts at iam|INSURED on 01244 732896.

Facts and figures about Epilepsy in the UK

Facts about Epilepsy

Epilepsy is one of the most common neurological conditions. It causes problems with brain signals that result in frequent or infrequent seizures.

A seizure is a sudden rush of electrical energy or burst that temporarily affects how the brain works. There’s a wide range of symptoms resulting from this activity and severities of seizures.

Generally, children are more likely to develop epilepsy or adults who are over 60. This is also a chronic condition, which can sometimes improve over a period of time.

Epilepsy symptoms

There are several different ways that people can be affected by seizures, which depends on the area of the brain that’s affected.

Symptoms include:

  • Fits (a period of uncontrollable shaking)
  • Tensing (the whole body will become tense and stiff)
  • Tingling feeling
  • Loss of smell or taste
  • Losing consciousness
  • Awareness (staring into space)

People can also faint or pass out and be unable to recall what happened.

Treatment for epilepsy

There are treatments that are available through the NHS which can help people to have less frequent seizures or even none at all.

Main epilepsy treatments include:

  • Anti-epilepsy drugs (most common medicine/treatment for epilepsy)
  • Surgery (remove a section of the brain causing epilepsy)
  • Diet (Ketogenic to reduce seizures)
  • Electrical device (helps to control seizures)

Treatments will vary from one person to another depending on severity. Most treatment will be for life but can be for shorter periods if seizures cease.

Epilepsy facts and terminology

Currently, there are around 600,000 people in the UK living with epilepsy. This is a similar number to the number of people diagnosed with autism, and roughly 4 times greater than people with Parkinson’s.

Facts about epilepsy

  • It is a neurological condition that can happen to anyone at almost any age
  • Every day there are approximately 87 people diagnosed with epilepsy in the UK
  • Epilepsy affects roughly 1 in every 100 people
  • Over 65’s: 1 in 4 people diagnosed with epilepsy is over the age of 65
  • Children: 1 in every 220 children will be diagnosed with epilepsy
  • Types of seizures: there are approximately 60 types of seizure
  • Social implications: people with epilepsy may suffer socially which can include loss of their driving license, job insecurity, educational issues, and social separation/anxiety
  • Mortality: life expectancy is an average of 8 years lower than the national average according to Public Health England (PHE) figures from 2018
  • People living in deprived areas are 3 times more likely to die from epilepsy according to PHE
  • Photosensitive epilepsy: roughly 3% of people with the condition are affected by flickering lights or flashing lights
  • Seizure free: Approximately 52% of people with epilepsy don’t have seizures

Terminology for people with epilepsy

According to research by the Epilepsy Society, the following are suggested terms to be used for people living with epilepsy:

  • Condition: epilepsy is not an ‘illness’, it’s a condition
  • Seizure: the term ‘fit’ is becoming less and less utilised by people living with epilepsy. The more common term now being used is ‘seizure’ and ‘epileptic seizure’
  • A person with epilepsy: people no longer wish to be called ‘an epileptic’ as it refers to them being the condition, rather than living with the condition. This is similar to the terms diabetic and asthmatic, which are also no longer deemed acceptable
  • Victim/sufferer: refers to people being helpless, rather than managing the condition
  • Grand Mal or Petit Mal: Now replaced by the medical terms which are more common, tonic-clonic and absent seizures

Epilepsy awareness events

Epilepsy awareness day (Purple Day) usually takes place towards the end of March in the UK and people are encouraged to wear purple to raise awareness for epilepsy

Epilepsy awareness week is also a national event in the UK which also promotes people to wear purple which is the colour used to represent epilepsy. This event usually takes place towards the end of May each year

Epilepsy awareness month takes place in November each year and is a global event to help raise awareness for people suffering from the condition

Epilepsy charities and support (UK)

Epilepsy Society
Website: https://www.epilepsysociety.org.uk
Helpline: 01494 601400
Address: CAN Mezzanine, 49-51 East Road, London, N1 6AH

Epilepsy Action
Website: https://www.epilepsy.org.uk
Helpline: 0808 800 5050
Address: New Anstey House, Gate Way Drive, Yeadon, Leeds, LS19 7XY

Epilepsy Research
Website: https://epilepsyresearch.org.uk
Telephone: 0203 096 7887
Address: CAN Mezzanine, 7-14 Great Dover Street, London, SE1 4YR

Young Epilepsy
Website: https://www.youngepilepsy.org.uk
Helpline: 01342 831342
Address: St. Piers Lane, Lingfield, Surrey, RH7 6PW

NHS Choices – Living with epilepsy
Website: https://www.nhs.uk/conditions/epilepsy/living-with/

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*references

Statistics and facts about Multiple Sclerosis in the UK

Facts and Stats about MS in the UK

What is Multiple Sclerosis?

Multiple sclerosis (MS) is a neurological condition that affects the brain and the spinal cord. People with MS have damage to the coating that protects their nerves (myelin) which causes various symptoms, including issues with mobility and blurred vision.

There is a substance in the body called myelin which protects the fibers that make up our nerves in our central nervous system. Myelin helps messages to travel through our bodies quickly between our brain and our body and limbs.

In someone with multiple sclerosis, their immune system (the body’s way of fighting infections), mistakes Myelin as a foreign body, attacking it. That can causes damage to the Myelin, stripping some or all of it off the nerves, sometimes leaving scarring, known as lesions or plaques.

The effect that this process can have on the body causes disruptions to the messages traveling through our central nervous system. These messages can either be slowed considerably, distorted, or even blocked completely.

What are the different types of Multiple Sclerosis?

There are three well known and more commonly referred to as types of multiple sclerosis which are:

  • Relapsing-Remitting MS (RRMS): is where people will have intermittent periods of symptoms, known as a relapse which can vary dramatically from one person to another. Roughly 85% of people diagnosed with MS have relapsing-remitting, which is often treatable with disease-modifying therapy (DMT).
  • Secondary Progressive MS (SPMS): is very often the next stage of the condition beyond relapsing-remitting. In this type of MS, the person will often experience progressively worsening symptoms and disabilities. The main difference between this and relapsing MS is that you would no longer have periods of no symptoms or relapses.
  • Primary Progressive MS (PPMS): is known to affect approximately 10-15% of people diagnosed with MS. The name primary comes from the simple fact that from the very first symptoms, they get progressively worse.

How many people does Multiple Sclerosis effect in the UK?

There are an estimated more than 130,000 people in the UK living with multiple sclerosis and that nearly 7,000 people are newly diagnosed each year. Roughly 1 in 500 people living in the UK have MS, and there are 130 new people diagnosed each week.

These statistics and estimates are provided by MS Society who work in partnership with Public Health England:

  • MS affects more than double the number of females as it does males (per 100,000 people in the UK = 272 females / 106 males)
  • Females between 50 – 59 are three times more likely to get diagnosed with MS
  • People (both male and female) are most likely to have MS between 60 – 69
  • MS is more likely to appear in ex-smokers than in the general population

Statistics are from Public Health England.

Can I get Life Insurance with Multiple Sclerosis?

Life insurance is essential for anyone who has either financial dependents (e.g. children, partner, or family members) or to cover for debts such as mortgages, loans, and businesses. Some people with medical conditions such as multiple sclerosis feel discouraged in applying for life cover, which is incredibly concerning for us. It is often far easier to get life insurance for people with MS than you might think, and we can help.

The main questions that insurance providers will ask someone with multiple sclerosis are:

  • When were you diagnosed with MS?
  • Which type of multiple sclerosis do you have?
  • What type of treatment or therapies are you receiving or have you received in the past?
  • Do you have any issues eating, swallowing or do you need to spend most of your time in bed?
  • Do you use walking aids (e.g. wheelchair, scooter, walking stick, or crutches)?
  • Are you working, or are you able to work?

Your answers to these questions, in addition to general health and lifestyle-related facts, will be taken into consideration. It is even possible to get life insurance accepted without additional medical evidence from your GP, which is a significant step forwards.

For more information check out MS LIFE INSURANCE

List of Multiple Sclerosis (MS) Awareness Events

Many national and international awareness events have been running for some years to help raise awareness and fundraise for MS:

  • MS Awareness Week: is a UK event which is run by UK based MS charities and often run towards the end of April.
  • World MS Day is held on the 30th of May every year.
  • MS Awareness Month: is held in the United States by the Multiple Sclerosis Foundation.

Multiple Sclerosis Charities and Online Resources

There are several major MS charities and non-profit organisations in the UK that help people with MS to manage on a day-to-day basis, as well as provide vital support. As well as the major charities, there are some local MS support facilities that provide treatment for people with MS. Some of the main MS charities and online resources relating to MS in the UK include:

MS-UK
Website: https://www.ms-uk.org.
Address: Unsworth House, Hythe Quay, Essex, CO2 8JF. Telephone: 0800 783 0518.

MS Trust
Website: https://www.mstrust.org.uk
Address: Spirella Building, Bridge Road, Letchworth Garden City, Hertfordshire, SG6 4ET. Telephone: 0800 032 3839.

MS Society
Website: https://www.mssociety.org.uk
Address: 372 Edgeware Road, London, NW2 6ND. Telephone: 0800 800 8000.

NHS Choices website contains a lot of useful information relating to Multiple Sclerosis
Link: https://www.nhs.uk/conditions/multiple-sclerosis/