When you take out a new health insurance policy the insurer will have some sort of mechanism to exclude pre-existing medical conditions. This will probably be “Full Medical Underwriting” or a “New Moratorium”. Here we discuss the pros and cons of moratorium underwriting or a “mori” as it’s colloquially known, for details of Full Medical Underwriting click here.
Choosing moratorium underwriting will normally mean that any pre-existing conditions from the last five years will be automatically excluded from your cover, normally for a period of two years from the policy start date. However, after that two-year period those conditions may become eligible for cover.
In the context of moratorium underwriting AXA PPP Healthcare defines a pre-existing condition as:
Any disease, illness or injury that:
- you have received medication, advice or treatment for in the five years before the start of your cover, or
- you have experienced symptoms of in the five years before the start of your cover: whether or not the condition was diagnosed.
So let’s say that last year you visited your GP with a sore left knee. The GP advised (advice) that you take ibuprofen (medication) and rest the knee. In this case the GP has not specifically diagnosed anything, but if you then took out medical insurance on a moratorium basis you would probably not be covered for any conditions related to that knee problem for the first two years of the policy because your insurer will likely consider it a pre-existing condition.
Types of moratorium
There are four main types of moratorium underwriting;
The 5:2:2 rolling moratorium is the most common and is employed by most insurers. In this case your pre-existing conditions from the previous 5 years will be automatically excluded for 2 years from the policy start date. However, these may become covered after this period if you’ve had 2 consecutive years free from treatment, advice, medication and symptoms (TAMS) relating to that condition.
For example, if you had a bad knee three years ago (pre-existing condition) and then one year into the policy you had a recurrence of that problem, you would not be covered. Also, the two-year period will ‘roll on’ and that condition will not become covered until you have two consecutive years free from TAMS. This is the ‘rolling’ aspect.
However, if you had a bad knee three years ago and had no problems within the first two years of the policy, then the condition would become covered in line with the benefits of your policy.
It is important to understand that a GP advised regular check-up relating to a particular condition (e.g. a yearly blood pressure check) will normally be considered advice and treatment. Therefore, that particular condition (and any that could reasonably be deemed directly related to it) will never be covered by your policy because there will never be a two-year period free of TAMS.
A 5:2:1 rolling moratorium follows exactly the same lines except that pre-existing conditions from the previous 5 years may become covered after the 2-year exclusion period with only a 1-year period free of TAMS.
For example, if you had a bad knee three years ago and had a recurrence of the problem eighteen months into the policy, you would not be covered. However, once the two-year exclusion period ends the condition would become covered as there had been a consecutive twelve-month period free of TAMS.
AXA currently offer a 5:2:1 on some of their company schemes.
The 5:2 fixed moratorium has no requirement for a TAMS free period. Any pre-existing condition from the previous 5 years will simply become eligible for cover 2 years after the policy start date, regardless of whether problems have recurred.
This type of moratorium represents by far the highest level of risk to the insurer and is now rare. At present only one insurer, The Exeter, offers a fixed moratorium on their Family Friendly policy. You must be under 65 to apply and your premium will be higher. To be accepted on a fixed moratorium the insurer is likely to have a health declaration that may exclude somebody who had previously received a serious diagnosis.
On some large corporate schemes you may come across a fixed two year moratorium where all pre-existing conditions will be covered after 2 years without the need to have a 2 year period free of treatment, advice, medications or symptoms. During the 2 year moratorium there’s no time limit on how far back the insurer will look for any pre-existing conditions.
Advantages of moratorium underwriting
- It’s quick and easy – Unlike full medical underwriting (FMU) there are no health questionnaires to complete, or medical records to check so it’s a much simpler application process.
- No danger of nondisclosure – As you are not required to disclose your full medical history, the risk of you forgetting to mention something important is removed. Mistakes like these can cause problems at the point of claim.
- Pre-existing conditions can become covered – Once you’ve satisfied the TAMS free period you will be able to claim for pre-existing conditions whereas with FMU they may be permanently excluded.
- Only the last five years are considered for pre-existing condition exclusions – Unlike full medical underwriting where any condition from your complete medical history may face exclusion.
- Switching options – Most insurers will allow switching on a ‘continued moratorium’ basis. This means that should you wish to change insurer (perhaps they offer better value for money or a better range of benefits) then you’ll have plenty of options in a competitive market. A continued moratorium (sometimes called a c-mori) is where the new insurer agrees to continue your existing moratorium providing that you meet their individual health requirements. These are normally a set of two or three yes/no health questions to determine your eligibility.
Disadvantages of moratorium underwriting
- People find it confusing – Hence this informative article!
- Delays at the point of claim – As you aren’t required to disclose your full medical history when you start the policy a moratorium is ‘underwritten at the point of claim’. For this reason there may be a delay while
your medical records are checked and sometimes your insurer may require additional information from your GP or consultant. Delays when claiming can be stressful. - Advice and symptoms count – Remember that any symptoms suffered or medical advice received within the last 5 years will be considered, regardless of whether a diagnosis was made. A more serious condition might not be covered because of relatively minor early symptoms.
- Not everyone is eligible for moratorium underwriting – Some insurers look to limit risk by restricting eligibility for moratorium underwriting. For example, The Exeter will not offer a fixed moratorium to anyone over 65 while Western Provident Association (WPA) stipulate that all moratorium applicants have a BMI of 35 or below.
So, is moratorium underwriting the right choice for me?
Moratorium underwriting is probably the most common form of underwriting in the Private Medical Insurance market today. However, whether it represents the right choice for you, your family or your group depends entirely on your own set of circumstances. In general moratorium underwriting is a great choice for;
- Healthy people – If you’ve enjoyed good health then a new moratorium is a quick and easy way to take out medical insurance without completing lots of forms.
- People with pre-existing conditions – A pre-existing condition that has not recurred in the last five years will be covered (for example a problem with your knee 12 years ago will not result in an exclusion). A pre-existing condition from the last 5 years that does not require regular check-ups and is unlikely to recur over the next 2 years may well become covered in the future. Neither of the above would be the case if you chose full medical underwriting.
- People in good health leaving a group scheme on Medical History Disregarded (MHD) basis – MHD underwriting is available to larger corporate schemes (and babies – see below). MHD imposes no exclusions whatsoever for pre-existing conditions but individuals generally don’t have the option to set up their own policy with MHD underwriting. It is however common for someone leaving a corporate scheme to be offered an individual policy on ‘group leavers terms’ and this policy will include the MHD underwriting. MHD underwriting can be invaluable for someone with on-going treatments and/or pre-existing conditions but it is expensive and will significantly reduce your significantly reduce your future ‘switching’ options as many insurers will not allow a switch on an individual MHD basis.
So if that individual is in good health or doesn’t mind losing cover for pre-existing conditions, then a change to moratorium underwriting will help you to reduce premiums in the long term and opens up the wider insurance market for future cost containment.
- Babies – Many insurers will automatically underwrite new-born babies on an MHD basis so that the baby is fully covered for anything related to a pre-birth condition. Whilst this is good practice, in reality having MHD underwriting in place for too long will significantly reduce your “switching” options as many insurers will not accept ‘switching’ on an individual MHD basis. If the child is healthy then moratorium underwriting should apply few (if any) exclusions, and will open up the wider insurance market for future cost containment.
If you would like advice on the best option for you then please get in touch.
Ashley Woodrow
Health Insurance Advisor. 14/08/2017
